Three of the country's largest mobile carriers - AT&T, Sprint and T-Mobile – have told Vermont Attorney General Bill Sorrell and 44 other state attorneys general that they will take steps to end "cramming".
The practice involves unauthorized third party charges known as “premium text messaging services” that appear on cell phone bills, often undetected by consumers.
Verizon says it will also largely stop allowing third party charges to be added to customers’ bills.
By some estimates, cell phone and land line cramming costs U.S. consumers $2 billion dollars annually.
In letter written in May, Sorrell and other Attorneys General told the Federal Trade Commission they receive “complaints from consumers that charges…appeared out of the blue on their phone bills without their authorization and for goods and services that the consumers neither requested nor used.”
According to the letter, the charges are often for text message "alerts" containing sports news, horoscopes, celebrity gossip or weather updates.
Other unauthorized charges are for products like screen savers and ring tones.
A survey conducted by the Vermont Attorney General’s office and the University of Vermont found that more than 60 percent of the respondents had unauthorized charges on their bills.
Nearly 80 percent were unaware that it’s possible for someone other than their cell service provider to add charges to their bills.
How Cramming Works
The practice of cramming raises questions about how third parties determine consumers’ phone numbers and how they are able to add charges to bills sent by cell phone carriers.
A recent lawsuit brought by the Texas Attorney General provides a fascinating description of how the system works and why consumers unwittingly find themselves paying the additional charges.
The lawsuit names four third party content providers and two marketing firms that allegedly used misleading methods to “trick consumers nationwide”.
In one case, the state contends that consumers using cell phones to search for bargains were lured by free online coupon offers.
When they clicked on “Get Coupon” they were directed to a registration page that requested their cell phone number. Clicking again on “Get Coupon” they were taken to another page where, according to the lawsuit, a countdown clock created a false sense of urgency.
The consumer hurriedly fills in the information, including, once again, the cell phone number, and clicks again on “Get Coupon” without taking the time to read something that appears to be a separate advertisement that says “Your soul mate is looking for you! Find out who it is with horoscope subscription. $9.99/mo.”
It is the paid horoscope that the consumer is actually signing up for, says the Texas Attorney General and, in fact, the free coupon is a fiction. But the consumer is not without a role in the scam. By entering their cell phone number twice, they have technically complied with a "double opt-in" requirement, which third party content providers are supposed to follow when they sign up customers.
Finally, a text is sent to the number. If the consumer responds, this triggers the actual charges.
It is the misleading nature of the web pages and the text that the Texas Attorney General says make it difficult for consumers to understand what they are agreeing to.
Another cramming technique outlined in the lawsuit is called "typosquatting".
This involves a third party company registering URLs whose addresses are close to those of legitimate sites, in hopes of ensnaring people who make a typographical error when they search for the web address.
Even consumers who do not text and have no access to the internet and thus, cannot have opted in to a third party good or service report having been crammed
The example given in the court documents is a consumer who is trying to reach the website www.mycokerewards.com but inadvertently types the address with an extra "s".
Once there, the Texas Attorney General says the consumer is asked to provide a cell phone number in a way similar to the “Free Coupon” example.
There are apparently other techniques. Sorrell, at a press conference this month, mentioned mass spam text messages sent out to computer generated phone numbers.
Consumers who respond are confirming that they have an active cell phone number, which can then be used to add charges to their carrier’s bill.
In their letter to the FTC, the attorneys general claim, “even consumers who do not text and have no access to the internet and thus, cannot have opted in to a third party good or service…report having been crammed. Too often, these consumers are elderly.”
Adding Charges To Your Bill
As explained in the Texas case, once a third party content provider has acquired a cell phone number, it goes through business called a “billing aggregator” in order to add the charge to a consumer’s cell phone bill.
The aggregators have contractual relationships with the major cell phone carriers.
Essentially, they serve as middle men and make it possible for the phone companies to deal with a small number of aggregators who funnel business from thousands of third party content providers.
According to the Texas lawsuit, the carriers make an effort to determine if the charges they’re being asked to included are legitimate or fraudulent.
The wireless carriers and the PSMS (Premium Short Messaging Services) industry have guidelines that content providers who bill consumers are supposed to comply with.
The major carriers also have their own policies designed to vet content providers and alert aggregators when there is evidence of fraudulent practices on the part of a third party provider.
In the Texas lawsuit, the state contends one of the defendants acted as an aggregator to intentionally mislead carriers about the content providers.
Once the charge shows up on a bill, authorities say it is often "disguised" and listed as an item that appears either innocuous or essential.
At a press conference, Sorrell distributed several copies of cell phone bills with unauthorized charges which were listed as "data", "premium messaging" and "share mobile photos".
Sorrell says now that Vermont's major cell carriers have agreed to stop third party premium text messaging services, these charges should disappear from consumers' phone bills.
Some of the carriers say they will continue to allow charitable or political donations to be billed by third parties.
