NCL teams up to fight back against cramming

By John Breyault, Vice President of Public Policy, Telecommunications and Fraud

Did you know that your telephone number is also a credit card? Neither do most consumers, but that’s exactly how it can be used by unscrupulous scam artists intent on defrauding consumers.

To most consumers, the monthly telephone bill is a multi-page monstrosity chock-full of confusing terms and charges. Many simply throw their hands up and just pay their bills every month without examining the bill in detail. The increasing use of online bill pay makes it even less likely that many consumers will pay close attention to their bills. Scam artists depend on this frustration and are making a killing because of it through a fraud known as cramming.

Cramming occurs when scam artists get telephone companies to bill their subscribers for charges they never authorized. Often, the scammers simply obtain lists of telephone numbers, create fake consumer “authorizations” and begin billing thousands of consumers for bogus “services” like e-faxing, enhanced voice mail, technical support and identity theft protection, to name just a few of the more common ruses. The dollar amounts of these charges are typically small, and are designed to go unnoticed on consumers’ bills. Consumers, small businesses and government agencies often report that they have unknowingly paid these charges for months before discovering the scam.

While the charges on any particular bill may be small, when multiplied over thousands of bills, this scam nets fraudsters big bucks. An investigation by the U.S. Senate Commerce Committee found that cramming could be costing Americans $2 billion per year. In one case, the Federal Trade Commission found that a single cramming operation netted more than $37 million over 6 years.

What’s worse, according to the Commerce Committee’s report, a significant portion of the $1 billion the nation’s telephone companies have earned from so-called third-party billing over the past decade is likely fraudulent.

The telecommunications industry has been aware of the problem of cramming for nearly two decades. In the late 1990’s and early 2000’s, the industry – under pressure from consumer advocates and regulators – adopted a series of self-regulatory measures designed fix the problem. While these efforts showed some initial promise, the scammers have learned to circumvent these protections and are again making huge profits on the backs of consumers.

Yesterday, NCL joined with four other national and state consumer groups to say, “enough is enough.” In reply comments filed at the FCC (and in initial comments filed earlier this year), NCL urged the Commission to prohibit third-party billing on wireline telephone bills (with certain exceptions) and to enhance anti-cramming protections on wireless bills. NCL is not alone in this fight. Nearly 20 state Attorneys General, the Federal Trade Commission and various state regulatory agencies have called on the FCC to fix cramming once and for all by getting the third-party billing system under control.

The FCC will now consider the comments received in its proceeding as it weighs new rules designed to make it harder for crammers to get away with their scams. Going forward, NCL will continue to be vigilant to make sure that this scam is ended once and for all.

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