(Adds quotes from hearing)
By Diane Bartz
WASHINGTON, July 30 U.S. mobile phone users have
likely paid hundreds of millions of dollars in unauthorized
charges "crammed" onto their bills, according to a report
released by the U.S. Senate Commerce Committee on Wednesday to
coincide with a hearing on the topic.
"Scammers figured out a way to beat the system," Senator
Richard Blumenthal, a Connecticut Democrat, said at the hearing.
"They have been absolutely relentless in doing so."
The cramming often originates with small companies that
provide celebrity gossip, ring tones or similar services.
But the money is collected by cellphone providers, including
Verizon, AT&T, T-Mobile US Inc or Sprint,
owned by SoftBank Corp, which typically keep 30 to 40
percent of the revenue, the staff report found.
"Some carrier policies allowed vendors to continue billing
consumers even when the vendors had several months of
consecutively high consumer refund rates - and documents
obtained by the committee indicate this practice occurred
despite vendor refund rates that at times topped 50 percent of
monthly revenues," the report found.
Speaking at the hearing for the carriers, Michael Altschul
of CTIA - the Wireless Association, said that companies agreed
that putting unauthorized charges on wireless bills was "wrong
and simply not acceptable."
He said carriers had also been "victimized by fraudsters who
crafted elaborate schemes to defeat the industry's
self-regulation and third-partying monitoring."
In November, AT&T Mobility, Sprint, T-Mobile US and Verizon
said they would stop billing for a certain type of charge,
premium SMS messages.
Vermont Attorney General Bill Sorrell, who led the states'
push against the practice, said that decision made a difference.
"Complaints to us have fallen off a cliff," Sorrell said.
Even so, another form of billing, direct carrier billing,
was on the rise, said FTC Commissioner Terrell McSweeny.
McSweeny urged the companies to institute basic protections
for consumers to prevent abuse of this type of billing, such as
cutting off companies with high complaint rates and spelling out
on wireless bills exactly what consumers are paying for.
In early July, a federal court in California shut down six
companies accused of cramming more than $100 million in
unauthorized charges on consumers' cellphone bills, according to
The FTC also filed a complaint against T-Mobile, the
fourth-largest U.S. wireless carrier, on July 1 accusing the
company of charging customers for subscriptions to services,
like flirting tips, which they never requested. It is asking the
company to refund the unauthorized charges.
T-Mobile CEO John Legere said that the FTC had
"sensationalized" the problem.
In statements, both Sprint and AT&T said they take seriously
the problem of cramming seriously. Both also said that they
refunded money to customers who had been cramming victims.
For the full Commerce Committee report see: tinyurl.com/lmwffv2
(Reporting by Diane Bartz; Editing by Ros Krasny, Dan Grebler
and Bernard Orr)