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Corporate sneakiness. Government waste. Technology run amok. Outright scams. Our effort to unmask these 21st Century headaches and offer solutions that save you time and money.

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  • 17
    Apr
    2013
    11:42am, EDT

    FTC files first-ever cast against mobile phone 'crammers'

    By Bob Sullivan, Columnist, NBC News

    Cellphone users annoyed by costly text spam or unexpected fees have hope: The Federal Trade Commission filed its first ever case against so-called "mobile crammers" on Wednesday.

    In a complaint filed in a Georgia federal court, the FTC is alleging that Wise Media sent consumers text message spam and signed them up for $9.99-per-month "premium" text services with horoscopes, flirting tips and other unwanted information.

    The FTC is seeking a permanent injunction against the company's alleged unfair trade practices and a freeze of the company's assets.

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    "Wise Media and its operators have taken advantage of the fact that consumers may not expect their mobile phone bills to contain charges from third parties and that Wise Media’s charges appear on bills in an abbreviated manner that does not always clearly designate the company as the source of the charge," the FTC said in its statement. "As a result, many consumers didn’t notice or understand the charges and paid the bills."

    Complaints against Wise Media began to appear online as early as April of 2012. The firm is not accredited by the Better Business Bureau, thought its Atlanta office has received 26 complaints since last year — nearly all billing related — though it says those complaints have been “closed.”

    Attempts to contact Wise Media were unsuccessful. Callers who dialed its Atlanta phone number on Wednesday heard a message saying the number had been changed to an unlisted number.

    The FTC says Wise Media has been hard to reach in the past.

    "The Commission alleges that Wise Media went to great lengths to hide its contact information from consumers. When consumers victimized by the scam were able to find a phone number for Wise Media, its call center employees frequently promised refunds that were never provided," it said.

    Cramming is a decade-old trick to place third-party charges on consumers' telephone bills without their knowledge. Despite Congressional hearings on the issue, which is among U.S. consumers' biggest beefs, telecom providers continue to have trouble stopping crammers.

    A report by Sen. Jay Rockefeller's office in 2011 found that consumers lose $2 billion annually to cramming.

    Mobile phone cramming is relatively new, however. As consumer phone bills become more confusing, and as smartphones become more powerful, the risks to consumers have grown quickly. NBC News recently described cell phone attacks that could cost consumers thousands of dollars and net criminals millions.

    Cramming doesn't require hacking, however.  It can be as simple as a third party company telling a telecom provider to add the charge to a consumer's bill. While telecom providers say they require third-party firms to get consumers' consent, consumers often complain that doesn't occur.

    “As more and more consumers move to mobile phones, scammers have adapted to this new technology, and the Commission will continue its efforts to protect consumers from their unlawful practices,” said FTC Chairwoman Edith Ramirez.

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    Consumers who receive an unexpected text message — such as notification that they've won a contest — should ignore the message and carefully check the following month's bills for unwanted charges.  They can also look up the number at a website called SMS Watchdog, which tracks potential mobile phone spam. Consumers should also consider calling their cell service provider and turning off “premium text message” services.

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  • 25
    Jan
    2013
    4:33am, EST

    Telecom firms can't say how 'crammed' charges were billed to unused phone

    By Bob Sullivan, Columnist, NBC News

    Despite years of investigations, congressional hearings and promises from the telecommunications industry, phone bill “cramming” --  the addition of usually small third-party charges without a subscriber's consent -- remains a major consumer headache.

    Brett Strauss can attest to that. He purchased an AT&T cellphone for his business that wasn't used for months, but somehow accrued more than $300 in charges for unwanted third-party services that were crammed onto his bill during that period. 

    Both AT&T and the third-party firm behind the charges, Los Angeles-based GoLiveMobile, said that they require a strict sign-up process they call "double opt-in," meaning consumers must twice confirm they authorize a charge to their service.

    But Mark Siegel, spokesman for AT&T, confirmed Strauss’ phone had been dormant when the charges appeared. How those charges ended up on his bill remains a mystery.


    Strauss said he has about 12 phones for his employees, and this one wasn’t needed. "The phone has sat in a drawer all this time having never been used," he said. "This makes the cramming issue all the more interesting. How do you cram an unused phone?"

    To most consumers, cramming is a mystery. The root of the problems dates back to the original breakup of the AT&T telephone monopoly in the 1980s, which required the telephone giant to allow third-parties to use their equipment and offer alternative services, such as long distance.  Rogue operators quickly learned they could trick AT&T and other phone providers into signing up consumers for services they didn’t want, and “cram” these onto their bills. Cramming has since been a thorn in the side of consumers, first targeting those with land-lines, when tack-on services like unnecessary voice mail were often snuck onto bills. It has seen resurgence in the age of cellphones and smartphones, as crammed charges are easily intermingled with legitimate third-party fees, creating even more consumer confusion.

    The charges may be small -- usually $9.99 or less at a time -- but they add up to big money. A report issued by Sen. Jay Rockefeller, D-W.Va.,  in 2011 found that consumers lose $2 billion annually to unwanted third-party phone charges, and big telecom firms earned $650 million from 2006-2011 as their cut from companies that crammed consumers. 

    Last year, the Federal Communications Commission adopted new rules aimed at curbing cramming, but the agency stopped short of banning the practice.

    Arguments about cramming often devolve into a he-said, she-said affair, with telecom firms saying consumers agreed to the charge and consumers denying they did so. 

    That's why the Strauss case is interesting.  AT&T doesn't disagree with his contention that the phone was unused, yet it still maintains that it requires third-party firms to utilize a double-opt in process. How could that be?

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    "We do require the double opt-in process I described to you, but that's not to say it's impossible for a customer to get, say, a text message from a third party that does not follow this process," said Siegel, the AT&T spokesman.

    The double-opt in process, as Siegel described it, involves a consumer texting a service to sign up, then receiving an initial acknowledgement text with a PIN code that must be sent back to the firm before billing is initiated.

    "It's not possible for (third-party firms) to magically appear and to start to bill you," he said. "Someone had to order (services) in some way, even if was just by accident."

    He added that AT&T is very strict about which third-party firms it allows into its system.

    "The only way we will agree to have third-party billing with a company is if they agree to use this double opt-in process," he said. "Ultimately, since this appears on our bill, we need to deal with it."

    For its part, GoLiveMobile said in an email that it would not comment on Strauss' situation, but that it follows strict sign-up procedures.

    “While we do not comment on individual customer cases, GoLive! has procedures and policies that exceed industry best practices, including in keeping with guidelines of the Mobile Marketing Association, its cell carrier partners, and various third-party auditing firms focused on consumer protection," said the statement, which the author asked be attributed to a company spokesperson. "Any and all customers must go through a double opt-in feature, where customers must be in physical possession of their mobile device and accept the industry-approved terms and conditions of the program, including all relevant charges and fees twice before any program is activated."

    Strauss said none of that happened. He hadn't heard of GoLiveMobile until he found a series of charges on his cellphone bill for a service named MoZoot, which is provided by GoLiveMobile. MoZoot lets users ask questions and get answers via text message. 

    "I never once contacted these folks as Google does just fine answering my questions," Strauss said.

    There are numerous other complaints about MoZoot published by consumers online. 

    The FCC said in 2011 that as many as 20 million U.S. consumers are hit annually by cramming. Crammers rely on consumers not scanning their bills diligently and not noticing the small charges they insert for many months – if at all. If they do notice them, they are often stuck in a Catch-22 -- the telecom carrier will refer them to the third-party firm to request a credit. The third-party firm will often refuse to give credit for more than 30 or 60 days.

    To its credit, AT&T refunded all Strauss' money -- a total of $318 -- directly after he called to complain. 

    In its statement to NBC News, GoLiveMobile said it has a liberal refund policy.

    "While the industry standard is to grant a refund for a maximum of 60-90 days, we go above and beyond this policy to grant refunds for the complete lifetime of any sign-up," it said. 

    Strauss was also given the chance to lock his cellphone account against any future third-party charges. He wondered why such a block wasn't enabled in the first place.

    "Why does AT&T only install the security (block) after you complain, even though they know clearly that this is a big problem?" he said.

    The new FCC rules require that firms give consumers the opportunity to block their phones against third-party charges, but they do not require firms to set the block by default, and most don't.

    "There is a very high demand from our customers for third-party billing,” said AT&T’s Siegel. “ That's not a surprise given the growth in apps, music downloads, and so on. This is something that our customers really want, because it's convenient."

    AT&T also sends regular, helpful text messages to consumers warning them that they are being billed for a third-party service and including a link to challenge the bill if necessary at http://att.com/mobilepurchases .  In fact, one such warning led Strauss to check his bill more closely and discover the GoLiveMobile charges.

    "That's the larger issue," Siegel said. "You need to check your bills carefully and if you see (an unwanted) charge get in touch with us right away."

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    More from Red Tape Chronicles:

    • Proposed 'privacy tax' would penalize firms that profit from consumers' info
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  • 28
    Mar
    2012
    7:07pm, EDT

    After investigation, AT&T, Verizon agree to stop 'cramming' phone bills

    By Bob Sullivan, Columnist, NBC News

    Verizon and AT&T have agreed to stop “cramming” consumers' telephone bills with unauthorized third-party charges, Sen. Jay Rockefeller announced Wednesday. The move comes after a Senate investigation revealed last year that consumers were hit with $10 billion in fraudulent charges due to the practice over the past five years.

    A TODAY show/msnbc.com investigation in July  revealed how extensive and frustrating cramming is, with maddening, mysterious $10 or $20 charges appearing every month on millions of Americans' phone bills.

    The investigation relied on a report commissioned by Rockefeller that found that three telecom firms - -- Verizon, AT&T and CenturyLink/Quest -- earned $650 million as their cut of cramming charges levied by third-parties since 2006.


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    "AT&T made the right decision to end cramming by August," the West Virginia Democrat’s office said in a statement on Wednesday.  "Something had to be done.  And while the decisions of AT&T and Verizon are a step in the right direction, I still believe we need to pass a bill that bans this abusive practice once and for all.”

    “AT&T has decided to discontinue most third-party billing on our customers’ landline accounts,” Michael Balmoris, an AT&T spokesman, said in a statement to msnbc.com. "We currently receive cramming complaints for only about one out of every thousand bills that contain third-party charges.  However, due to continued concern over the possibility of unauthorized charges, we have decided to take this additional step and eliminate third-party billing for most types of services.”

    Verizon spokesman Bill Kula also confirmed the change, saying in an email: “On March 19, Verizon’s wireline business began notifying its billing aggregators (or “clearinghouses”) and carriers that it is going to cease providing third-party billing services for so-called 'miscellaneous' or 'enhanced' services. All billing of those services will be phased out by the end of 2012.  … Verizon wireline will continue to provide billing services for third party charges that generally relate to telecommunications or information services that use our network.”

    Separately, Verizon earlier this month agreed to settle aclass-action lawsuit related to cramming, and agreed to refund 100 percent of victims' money for any unauthorized third-party charges consumers suffered from April 27, 2005, through Feb. 28, 2012.

    Cramming has vexed consumers and generated mountains of complaints since 1995, when land line providers began making it easy for third-party firms to sell add-on services like voice mail through local phone bills. 

    The problem is it's too easy for third parties to attach unwanted items to consumers' bills:  Previous investigations have found firms frequently trick consumers into signing up using sweepstakes entries or cashing small checks that also serve as authorization forms. In other cases, the third-party firms simply lie about getting authorization, a scam called “phantom billing.” Last year, Illinois Attorney General Lisa Madigan testified that usage rates for the unwanted services could be as low as 1 percent.

    "Committee staff has found hundreds of egregious examples of cramming," the Rockefeller report found. "Third-party vendors have enrolled deceased persons in their so-called services and charged family members' telephone bills for it. They have charged telephone lines dedicated to fire alarms, security systems, bank vaults, elevators and 911 systems. Senior citizens' telephones have been enrolled in web-hosting services, even though they have never used. A children‘s hospital was charged for a celebrity tracker e-mail service that provided daily celebrity news feeds, photo, and videos. A national bank‘s telephone lines were charged for credit protection plans."

    Perhaps nothing illustrates how out of control cramming had become as well as AT&T's own victimization.

    "Committee staff confirmed that third-party vendors associated with one hub company crammed at least 80 of AT&T‘s own telephone lines with charges for services such as voicemail, sometimes for periods as long as 18 months," the report said.

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  • 13
    Jul
    2011
    7:55am, EDT

    Big telecom firms make millions from cramming fees, senator says

    NBC senior investigative correspondent Lisa Myers reports that many third-party companies are burying hidden charges on phone bills -- a practice called "cramming" -- and major phone providers are allowing it to happen.

    By Bob Sullivan, Columnist, NBC News

    Mysterious fees and services crammed onto phone bills are a “nationwide epidemic” for U.S. consumers, but a reliable source of revenue for some of America's biggest telecommunications companies, a year-long congressional investigation has found. 

    A report issued Wednesday by Sen. John Rockefeller, D-W.Va., says that three firms -- Verizon, AT&T and CenturyLink/Quest -- earned $650 million as their cut of cramming charges levied by third-parties since 2006.

    Cramming charges -- such as unwanted $10-per-month voicemail or Web design services -- have been frustrating phone customers for more than 15 years, thanks in part to ill-considered rules designed to enhance competition in local phone markets. Consumers often don't spot the small monthly fees, but even when they do getting refunds can be a nightmare: The telephone provider that sends the bills often refuses to issue refunds, instead referring consumers to the third-party firms, which are often unresponsive.  The Federal Communications Commission estimates that 15 million to 20 million consumers are crammed every year.  Rockefeller’s report says cramming could cost U.S. consumers $2 billion annually.

    Congress has been unable to fix the problem for more than a decade.

    "I think it's embarrassing for the Congress ... but they're big companies.  They don't have to make money that way," Rockefeller told NBC News in advance of a hearing on cramming Wednesday. "I think it's reprehensible and …  shameful behavior.  And don't tell me they don't know about it.  They have to know about it."

    Crammers are so bold that they have jammed unauthorized charges onto dead people's phone bills, government agencies' telephone lines -- even onto lines owned by AT&T.

    "Committee staff has found hundreds of egregious examples of cramming," the report said. "Third-party vendors have enrolled deceased persons in their so-called services and charged family members' telephone bills for it. They have charged telephone lines dedicated to fire alarms, security systems, bank vaults, elevators and 911 systems. Senior citizens' telephones have been enrolled in web-hosting services, even though they have never used. A children‘s hospital was charged for a celebrity tracker e-mail service that provided daily celebrity news feeds, photos, and videos. A national bank‘s telephone lines were charged for credit protection plans."

    Perhaps nothing illustrates how out of control cramming has become as well as AT&T's own victimization.

    "Committee staff confirmed that third-party vendors associated with one hub company crammed at least 80 of AT&T‘s own telephone lines with charges for services such as voicemail, sometimes for periods as long as 18 months," the report said.

    During the hearing by the Senate Commerce Committee, Rockefeller called on Congress to take action against what he called "a scam that has cost telephone customers billions of dollars."

    "It’s time for us to take a new look at this problem and find a way to solve it once and for all," he said. "We’ve let the crammers get away with these abuses for far too long. There’s also a cost of cramming that is harder to put a dollar figure on – the countless frustrating hours that families and businesses spend trying to get these charges taken off their phone bills." 

    Cramming complaints have piled into state consumer offices, the Federal Trade Commission and the FCC since at least 1995, but neither Congress nor the phone companies that collect the money have been able to slow the problem or find the companies behind it. 

    NBC's Lisa Myers did, however. In an investigative report that aired Wednesday on TODAY, Myers located one company that acts as a clearinghouse for cramming; tracked down dozens of other firms that hide behind the same P.O. boxes; and  found that hundreds of firms that have "D" of "F" ratings with the Better Business Bureau. Myers also had no trouble finding consumers hit with outlandish cramming charges on their phone bills: $14.95 for ID theft monitoring; $16 a month for a fax service; $40 a month for voicemail.

    "Why are they in business?  Probably because they're scamming and cramming and making money off of innocent people," Rockefeller said. "I'm shocked.  I'm angry.  I'm frustrated that nobody's been able to stop it."

    The heat is getting turned up on cramming recently, however.  On Tuesday, the FCC proposed new rules that would require more obvious disclosures by third parties on phone bills.

    Illinois Attorney General Lisa Madigan wants to go much farther, however, and is calling for an outright ban on third-party billing on phone bills. 

    "Simply put, these deceptive and sometimes fraudulent solicitations for products that no one wants or agreed to buy have persisted for at least 15 years and show no signs of disappearing," she said. “It is time to put an end to third-party billing on telephone bills by banning them.”

    Under current rules, providers are forced to give third-party firms the chance to market services like toll-free numbers or website hosting using the providers' equipment and billing services through an arrangement that has its origins in the original breakup of AT&T’s telephone monopoly. But it's too easy for third parties to attach unwanted items to consumers' bills -- previous investigations have found firms frequently trick consumers into signing up using sweepstakes entries or cashing small checks that also serve as authorization forms. In other cases, the third-party firms simply lie about getting authorization, a scam called “phantom billing.”

    While crammers collect billions of dollars, telecom firms get a percentage of each payment for passing along the charge. Rockefeller said that added up to $650 million for the three big firms in the last five years. Rockefeller’s report says Verizon, for example, collects $1 to $2 per charge.

    “It's something the phone companies do know. And they can't not know it -- because -- it's bringing in a lot of money to them,” he said. And it’s bringing them a lot of complaints. The report says more than 500,000 customers have contacted AT&T, CenturyLink/Qwest, and Verizon to complain about cramming in the past five years.

    The report also claims that phone companies put pressure on employees to grant shady third-parties access to consumers' accounts for billing purposes.

    "Documents reviewed by the committee staff show that some telephone company employees feel financial pressure to approve third-party vendors even though the companies appear to be crammers," it says.

    Both Verizon and CenturyLink told NBC News that they do not tolerate cramming, and that they carefully scrutinize outside companies and respond to complaints. Both declined on-camera interviews. AT&T had no comment. 

    Walter McCormick, CEO of U.S. Telecom Association, said at Wednesday's hearing that telephone firms have made strides while clamping down on bogus third-party charges, and said many consumers find third-party billing to be covenient. He tried to deflect accusations that telecommunication companies use cramming to bolster their bottom lines by saying that third-party billing revenues represent just "one-tenth of one percent" of telecom firm revenue. But he acknowledged that unauthorized charges are a "continuing problem."

    "We pledge our industry's good faith and our committment to work with you," on solutions, he said.

    Madigan said the first complaints about cramming showed up in her office in 1996. At the time, products such as prepaid calling cards, voice mail service, credit repair services, cell phone warranties, local singles matching services, Web page design, and toll-free numbers were most frequently crammed, she said. More recently, the scams have evolved to include credit repair, identity theft prevention and monitoring, business advice, online photo storage, roadside assistance, online yellow pages listings, and many other services.

    They have a common denominator: Consumers pay for them, sometimes for years, but don't want them or use them.

    "These low usage rates, less than 1 percent, indicate that consumers did not knowingly sign up for them," she said.  "In one case I brought, the vendor had billed over 9,800 Illinois consumers for credit repair services. Although the credit repair services were designed for individuals, the billed consumers include a county coroner’s office, a Steak N Shake restaurant and a public library dial-a-story telephone line."

    Many consumers don't understand that their telephone number can be used "just like a credit card," she said.

    The deception has evolved since the arrival of the “Do Not Call” list in 2003, she said, with more consumers tricked into third-party telephone services via online Web pages.

    Both Madigan and Rockefeller say that telecommunications industry groups, in response to an initial wave of complaints in the late 1990s, promised to clean up cramming through self-regulation -- and failed. 

    "They originally came up to us and said, 'Look, we understand this is a problem.  We don't want to treat our consumers this way, so we want do it on a voluntary basis,” Rockefeller said. “Don't mandate us to do it because...' Then they made a very good case.  Stupidly -- we went along with that."

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    Rockefeller says he plans to introduce legislation that would make cramming explicitly illegal, but that kind of consumer protection is still in the future.

    In the meantime, the best way for consumers to protect themselves is to call their local phone company and request that it shut off third-party billing services -- many will, for free.  Consumers who've been crammed and scammed should call their local phone company and insist on a refund; they should also file a complaint with their state attorney general's office and the FTC. But most important: Scan those phone bills every month for surprise charges and unwanted services. They're easy to miss.

    Follow Bob Sullivan on Facebook for early notice on new columns and other info.

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    Read statements to NBC News from Verizon, CenturyLink and daData in response to the report about unauthorized charges appearing on phone customers’ bills, a practice called “cramming.”

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I'm a reporter for msnbc.com and I try to write stories that make the world a little bit more fair. My blog, The Red Tape Chronicles, is among the most popular consumer affairs columns on the Web. My recent book, Gotcha Capitalism, was a New York Times best seller. Since 1995, I've written about the troubles created for consumers by both technology, covering topics like privacy, identity theft, computer viruses and hackers.

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