Markets Wired

In testimony before Congress today, the Federal Trade Commission provided an update on issues related to the placement of unauthorized charges on consumers’ mobile phone bills, a practice known as mobile cramming.

Testifying on behalf of the Commission before the Senate Committee on Commerce, Science and Transportation, FTC Commissioner Terrell McSweeny told lawmakers that the Commission believes mobile cramming represents a significant consumer protection issue.

“Mobile cramming is a significant problem that threatens to undermine confidence in the developing payment method known as ‘carrier billing,’” said the testimony. “As stakeholders have noted, carrier billing of third-party charges may be particularly beneficial for unbanked and underbanked consumers. Additionally, consumers have used text messages to donate funds to a charitable organization, with the charge placed on their mobile phone account. As carrier billing has developed, however, fraud has become a significant problem for consumers.”

The testimony notes that over two decades, the FTC brought more than 30 cases to combat cramming on landline phone bills. Landline cramming cases brought by the Commission have led to tens of millions of dollars being returned to consumers over the past twenty years, the testimony notes, highlighting the FTC’s partnership with both the Federal Communications Commission and state attorneys general on these cases.

In light of Americans’ rapidly growing use of mobile devices, the FTC has turned an eye to mobile cramming in recent years, the testimony states. In the Commission’s six mobile cramming cases brought since the spring of 2013, the three that have been fully or partially resolved have resulted in strong relief for consumers. The agency has obtained judgments totaling more than $160 million, as well as court orders preventing the defendants from further illegal cramming.

The testimony also highlights the Commission’s ongoing cases against two other merchants who crammed charges onto consumers’ bills, along with its case against wireless carrier T-Mobile, filed earlier this month. The testimony notes that on the same day the Commission announced its case against T-Mobile, the FCC announced that it had opened an investigation into the company’s cramming practices.

In bringing these cases, the Commission learned that the amount of harm reported by cramming victims significantly understates the overall cramming problem, the testimony notes.  This is because consumers are sometimes unable to discern which charges are unauthorized due to the confusing placement of crammed charges on their bills.

The testimony also points to the difficulties consumers have noted in seeking refunds for crammed charges, sometimes receiving refunds for only a few months of charges that may have been appearing on their bills for much longer.

The testimony then highlights the recommendations made by the Commission’s staff in a report on mobile cramming issued this week. Among the recommendations: that consumers be able to block some or all third-party charges, that merchants avoid deceptive marketing of services, and that carriers watch out for signs of fraud by companies placing charges on consumers’ bills.

The report also recommends that when carriers or intermediaries discover a company has been cramming charges, consumers should be informed and given the opportunity to seek a full refund of the charges they paid. In addition, the report calls on carriers to make clear disclosures to consumers about third-party charges on their monthly bills, or by other means in the case of consumers who auto-pay bills or use a pre-paid service that does not receive a monthly bill.

The Commission vote approving the testimony and its inclusion in the formal record was 5-0.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.