AARP Eye Center
Sometimes it takes a long time before dictionaries add a new meaning for a word. “Cramming” is a term used by consumer protection agencies, and it is well understood by the perpetrators of consumer fraud. To find the general concept of the word, you can look to a web site such as the one of the Federal Communication Commission, which says:
“ Cramming” is the practice of placing unauthorized, misleading or deceptive charges on your telephone bill. Crammers rely on confusing telephone bills in an attempt to trick consumers into paying for services they did not authorize or receive, or that cost more than the consumer was led to believe.
Cramming applies to all sorts of bills, not just to telephone bills. During the past few weeks the enforcement agencies have been hard at work challenging cramming schemes.
FTC Challenges Unauthorized Mobile Phone Billing
On November 21, 2013, the Federal Trade Commission announced that Wise Media, an Atlanta-based company, and two of its officers had agreed to settle a case in which the company was accused of cramming charges onto cell phone bills without the consent of the customers, which caused more than $10 million in injury. The defendants were permanently banned from placing any charges on consumers’ telephone bills directly or through anyone else and from using any other method to charge consumers for purchases without ensuring that the customers were aware of the terms of purchase in advance and had expressly agreed to be charged. Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, said “Getting consumers’ consent before charging them is as basic a consumer protection as you’ll find, whether you’re dealing with a brick and mortar store or with a mobile payment provider.”
Wise Media allegedly billed consumers for “premium services,” including text messages with horoscopes, flirting and love tips, and other information. The Commission’s complaint alleged that consumers across the country were signed up for these services, and that the operation placed repeating charges of $9.99 per month on mobile phone bills, without the knowledge or permission of the victims.
The settlement includes a judgment of $10,965,638, which is partially suspended due to the defendants’ inability to pay the full amount. One of the individual defendants will be required to surrender nearly all of his assets along with any remaining assets of the company, valued in excess of $500,000. The settlement with the other individual defendant and Concrete Marketing Research, LLC, a company charged with receiving unlawful gains from the scam, requires them to pay $175,817.
Massive Charges on Telephone Bills for Unwanted Charges
On December 16, 2013, the FTC announced an action to stop a mobile phone cramming operation that placed tens of millions of dollars on consumers’ mobile phone bills without their permission. The FTC is seeking to shut down the operation and recover the money.
Lin Miao and Andrew Bachman, through their companies, allegedly sent text messages to consumers with “love tips,” “fun facts,” and celebrity gossip alerts. They then put unauthorized monthly subscription fees for these “services” on the victim’s mobile phone bills. People often do not closely examine their monthly statements, or, if they do, they assume that the charges are legitimate. Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said “This case puts another dent in the armor of scammers who use mobile cramming to take advantage of consumers across the country. She promised that “The FTC will continue working to protect consumers from unwanted third-party charges on their mobile phone bills.”
People allegedly received text messages with random facts that they dismissed as spam, not realizing they had received the texts through a paid subscription service they did not knowingly buy. In addition, the defendants allegedly used misleading website offers to obtain consumer phone numbers that they used to sign up consumers for service without the victim’s knowledge. For example, one of their websites told visitors they had won free Justin Bieber tickets, which they could claim by filling out an online quiz. The victims had to enter their telephone numbers. They did not receive the tickets, but even worse, their phone numbers apparently then were signed up for paid services. Charges, typically $9.99 per month, continued to appear on the victim’s bills until the consumer noticed them and took action to unsubscribe. The charges appeared with identifications such as “77050IQ12CALL8663611606” and “25184USBFIQMIG.”
The FTC alleged that when victims did notice the charges, the process of getting a refund was often highly cumbersome. In some cases, representatives of the company promised refunds that never arrived. In other cases, the victims were able to get partial refunds from their telephone companies, but only for a limited number of months. The number of consumers seeking refunds from their telephone companies was as high as 40 percent in some months. In some instances carriers suspended the defendants from placing charges on consumers’ bills.
The complaint alleges that the defendants violated the law by deceiving consumers, leading them to believe they were obligated to pay for the text message services and by billing consumers for services they had not requested.
“Gift Card” and “Free iPhone” Text Spam
On November 20, 2013, the FTC announced a settlement with a group of marketers who had allegedly sent more than 30 million deceptive spam text messages to consumers, directing them to deceptive websites. Cresta Pillsbury, Jan-Paul Diaz, Joshua Brewer and Daniel Stanitski, and their company Ecommerce Merchants, LLC, which did business as Superior Affiliate Management, were among the subjects of a series of FTC actions.
The defendants allegedly sent spam text messages to people offering supposedly free iPhones, iPads, and $1000 gift cards, with content such as “FREE MSG: You Have Been Chosen To Test & Keep The New iPad For Free Only Today!! Go To [scam website] And Enter 2244 And Your Zipcode To Claim It Now!” The victims did not receive the promised items. Instead they were taken to sites that requested personal information and required to sign up for numerous additional offers, often involving other purchases or paid subscriptions.
The settlement permanently bans the defendants from involvement with sending unauthorized or unsolicited text messages. They also are prohibited from deceptively presenting an offer as “free,” or from misleading consumers about the use of the personal information collected.
The defendants also allegedly operated a network of affiliates that sent spam text messages. As part of the settlement they are prohibited from operating an affiliate network for deceptive purposes, required to inform members of any future affiliate networks they operate of the terms of the order, and required to monitor the affiliates to prevent deceptive or unfair activities.
The settlement requires a monetary judgment of $356,950, the full amount of money the defendants earned from the scam after paying their affiliates. However, the judgment is suspended due to their inability to pay.
Scam artists know that your telephone and your computer can be a direct channel to your bank account. Check your bills carefully each month. If you do not recognize a charge or understand why it is on your bill, call your telephone or internet service provider and demand an explanation. For the same reason, be very skeptical about spam messages you receive.
Be especially wary of “free” offers. A “free” offer that lets a crook into your personal financial information is way too expensive for you to accept.
Article contributed by Alan L. Marx, volunteer blogger for AARP Tennessee.