WASHINGTON — Those surreptitious charges for flirting tips, yoga lessons and psychic services, long a problem on landlines, have become a costly nuisance for mobile phone users — and a new focus for regulators.
In the last two years, regulators have found that hundreds of thousands of mobile phone users have been charged for “premium text” services that they did not authorize, a practice known as bill cramming.
The crackdown has begun. On Wednesday, the Federal Trade Commission announced its first cellphone cramming case, accusing a company of taking advantage of consumers by tacking unwarranted charges onto their mobile bills.
In a civil complaint filed in Federal District Court in Atlanta on Tuesday, the F.T.C. charged Wise Media and two of its owners, Brian M. Buckley and Winston J. Deloney, all of the Atlanta area, with unfair or deceptive business practices. A fourth company, Concrete Marketing Research, was charged with receiving funds that could be traced to Wise Media’s actions.
The messages — promising horoscopes, love tips and other services — are sent as premium SMS service. The technology, in legitimate use, allows a consumer to buy digital content like games, with the cost being added to the consumer’s phone bill.
But the F.T.C. said that Wise Media illegally charged mobile phone users. In the typical instance, those charges amounted to $9.99 a month and recurred indefinitely, showing up on a consumer’s bill “with abbreviated and uninformative descriptions.” While the initial text messages often included instructions to text “STOP” to a given number to end the messages, the F.T.C. said the company frequently failed to honor that request.
The trade commission wants to freeze Wise Media’s assets and order the company to return to consumers all unauthorized payments it received from wireless customers. In its complaint, the F.T.C. said only that the defendants had made “millions of dollars” from placing unauthorized charges on phone bills.
Wise Media and Concrete Marketing could not be reached for comment. Wise Media’s most recently known phone number has been changed to an unlisted number. Mr. Buckley and Mr. Deloney also could not be reached. In a news release, the F.T.C. said the company had typically gone to “great lengths to hide its contact information from consumers.”
Jessica Rich, an associate director in the F.T.C.’s division of financial practices, said, “We’re now seeing mobile phone cramming emerging as more of a problem.”
More cases could follow.
Consumers are increasingly complaining about unwarranted charges to regulators, wireless providers and organizations like the Better Business Bureau. The commission recently found that 30 percent of the complaints it received in 2011 over cramming involved wireless phones, up from 16 percent the previous year.
Over the last year, the F.T.C. said, phone companies have at times refunded some of the charges to consumers, but most consumers do not notice the charges for months after they begin to occur, if at all.
Wireless phone companies in California alone refunded an average of more than $2 million a month last year to consumers who complained about unauthorized wireless text charges, according to the California Public Utilities Commission. Refunds were requested on only about 12 percent of the total monthly charges for those premium text services, the public utilities commission said.
Senator John D. Rockefeller IV, Democrat of West Virginia and chairman of the Senate Commerce Committee, said Wednesday that he believed phone companies had not done enough to prevent cramming from migrating from landline to wireless phones. “The F.T.C.’s action today confirms my fear that our success in stopping wireline cramming has forced crammers to find other ways to scam consumers,” he said.
Regulators are trying to be proactive.
On Wednesday, the communications commission conducted a workshop with companies and advocacy groups focused on cramming, and bill shock, a similar issue that arises when consumers receive large charges on their phone bills for going over their monthly allotment of data or phone minutes. The F.T.C. is conducting a similar workshop on May 8 to study mobile cramming.
The agency is also considering expanding its anti-cramming rules to include mobile phones.
Article source: http://www.nytimes.com/2013/04/18/business/ftc-takes-aim-at-unwarranted-cellphone-charges.html?partner=rss&emc=rss