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Congress, Feds Sleep While Cramming Charges Afflict Thousands

Congress Created the Problem, Won't Lift A Finger to Solve It

By Joseph S. Enoch
ConsumerAffairs.com

June 12, 2006

Cramming • Wireless Carriers Agree To $1.5 Million Cramming Settlement • Illinois Files "Cramming" Suit Against California Firm • Florida Seeks to Outlaw Cramming • AT&T Settles Cramming Suit • Feds Settle with BSG/ZPDI/Billing Concepts • Verizon Signs Florida Anti-Cramming Agreement • Embarq Agreement Protects Florida Consumers from Cramming • Florida Company Agrees to Repay 'Cramming' Charges • Florida Files "Cramming" Suit • Congress, Feds Sleep While Cramming Charges Afflict Thousands • Florida Seeks Nationwide Telephone Billing Probe • Florida Opens "Cramming" Probe • Cramming Hits Consumers When They Least Expect It • Spitzer Wins Cramming Concessions from Verizon • Mobsters Charged in Cramming Scheme • FTC Opens Hotline for Epixtar Victims --- • ILD Telecommunications • Billing Concepts/ZPDI

The year is 1998. The two-year-old Telecommunications Act is starting to show some wrinkles in the form of "cramming," or the placing of unauthorized charges on local telephone bills.

To combat the problem, the Federal Communications Commission (FCC), hardly a hotbed of consumer protection zealots, met with the honchos of the telecommunications industry to hammer out a solution. What this "workshop" yielded was a long list of "guidelines" lacking any enforcement mechanism.

Eight years later, guidelines notwithstanding, ConsumerAffairs.com receives daily complaints, more than 2,000 in total, about strange charges "crammed" onto consumers' phone bills. The majority of those charges include an 800 number and a company to call. In a vast number of cases that company is ILD Telecommunications, Inc.

ILD is the second largest phone bill clearing house, behind Billing Concepts, a company that has logged about 500 user complaints in its various identities, ZPDI being the best known. These are not struggling start-ups. According to PhoneMag.com, ILD had annual revenue of about $140 million in 2003.

Why do we receive so many more complaints about ILD than about Billing Concepts?

Good question. Unfortunately, Billing Concepts spokeswoman Sharon Gallardo declined to comment on her company's operations, saying that only the president, Greg Carter, was permitted to talk to the press. He did not return our telephone calls.

ILD got its start as Intellicall, a company that makes payphones that store the outgoing numbers placed from the phone. Steve Hall, spokesman for the now independent Intellicall, said the practice of storing phone numbers placed on payphones is now a common practice that even the major carriers such as AT&T employ.

In 1997 ILD joined forces with Worldcom/MCI by taking over the telecommunication company's operator functions, handling long distance and a host of other services.

Following the takeover, ILD raised rates for inmates making outgoing phone calls from prison. New Hampshire officials charged the practice was illegal. The case went to the New Hampshire Supreme Court, which found ILD and Worldcom guilty of breaking anti-monopoly laws while also breaking FCC rules for raising rates without informing either the FCC or the prisoners.

Although the history of this elusive corporation is hard to trace, it appears from consumer complaints that ILD has been industriously cramming charges onto consumers' bills since at least 2001.

Without much of a hitch, an unknown number of business clients have used ILD to bill consumers for various real and imagined services. Under the terms of the Telecommunications Act, which was supposedly written to encourage competition, the larger carriers that actually distribute the bills, such as Verizon and BellSouth, can do nothing to erase or block these often fraudulent charges until the consumer complains, and sometimes not then.

Although ILD won't share its client list, here are a few of the companies that ConsumerAffairs.com readers have had problems with:

• WebOne USA
• Samba Enterprises
• Voice Messaging
• Voicemail Direct USA
• Axcess Internet Solutions
• SurfSafe
• Emergency Roadside Voicemail
• Link Systems

Not Doing Nothing

Perhaps it's not fair to say that ILD and others in the legalized cramming business aren't doing anything to control unscrupulous practices.

After all, ILD is a member of the Coalition to Ensure Responsible Billing (CERB), a group of companies similar to ILD that was formed to recognize the "opportunity to assist with the critical effort of curbing 'cramming.'" The most recent action documented on CERB's archaic website dates back to August, 2001.

Despite any slight strain it might have incurred in holding back the tide of cramming, life has been good for ILD. While Worldcom gave in to bankruptcy in 2002, ILD's profits were in overdrive. In fact, ILD still operates MCI's operator services, said Kathy McQuaid, vice president of ILD's billing services.

Nor has the company been besieged by public servants eager to protect consumers from unfair charges. In fact, only once since a New Hampshire and FTC case in 2002-2003 has ILD been censured for its practices.

In 2002, a company called 800 Connect was charging phone users who had misdialed prominent 800 and other supposedly toll-free numbers. The user would be given the option to press "1" to be given the correct number. Following the user pressing "1," a message would give the correct number. If the user stuck around to hear the whole message, he or she would learn they would be charged $1.99 to $2.99. 800 Connect used ILD to place the charges onto phone bills.

Connecticut Attorney General Richard Blumenthal settled with ILD and 800 Connect in 2002. The FTC followed suit in 2003 and on a national scale, found ILD and 800 connect guilty of misrepresenting charges.

Business As Usual

Although 800 Connect is no more, ILD continues cramming charges onto consumers' bills and profits onto its ledgers. ILD has amassed 1,300 consumer complaints in the ConsumerAffairs.com database.

For some, ILD cancelled the charges and issued a refund without any hassle. For many though, it was a different story.

Some ConsumerAffairs.com readers say ILD knows shocking information about them.

Kathryn of Shelby, Ala. said she is worried about identity theft after she called ILD only to discover they had her name, date of birth, social security number, address and mother's maiden name.

Many others report that ILD played apparently fake or edited recordings of the user agreeing to whatever service they were charged for.

"I called about the charge to say I did not authorize it and was told they had a recording (proving I did)," wrote Thad of Kawkawlin, Mich. "Well, lo and behold it was me on the recording but you could faintly hear the lady I was talking to. You could hear me crystal clear but there was a recording over top of the lady I was talking to. Needless to say the conversation they say took place didn't."

McQuaid said many ILD clients use a "reputable" company called VoiceLog to record consumers. She said ILD does not edit the recordings in any way and she doubted any of their clients would do so.

It's Easy

Sometimes making a collect call or accidentally signing up for a fraudulent service online is all it takes for companies to use ILD to bill consumers every month for a service they might not even be receiving.

In the case of one ILD client, Voicemail Direct USA, all someone needs is the phone number of their worst enemy before that person will start to notice $15 charges on their phone bill, the first of which is nonrefundable.

In most cases though, it's a complete mystery to consumers how ILD's clients originate charges.

"I am the power of attorney for my mentally disabled sister," wrote Donie of Auburn, Ala. "This month ILD Teleservices, Inc. had added a charge of $16.30 to her phone bill for "Nationwide Voice Messaging." … This service was not requested nor authorized by me or my sister."

However, ILD is not solely to blame. ILD is the billing agent. It has legitimate contracts with many of the nation's largest telephone companies including Verizon and BellSouth.

McQuaid feigned remorse at the suggestion that ILD is doing anything wrong.

"It is hard to take (when people call ILD a cramming company). We're not. We're the billing agent," she said. However, in many cases it is ILD's phone number and name that appear on the bill.

McQuaid said ILD has a screening process for its clients and has terminated contracts for companies that have caused excessive complaints. It is also not ILD who is signing up these unsuspecting customers. It is ILD's clients.

Who's On First: The FEMA Hand-Off

For consumers turning to local and federal governments for answers on what to do if they are a victim of cramming, they might get the runaround and end up with a handful of pamphlets instead of money.

"The FCC does not currently have any initiatives against cramming," said Dan Rumelt, FCC spokesman. Rumelt added that there are some pamphlets for victims of cramming but that the FTC would most likely be the best place for consumers to go.

"The FCC is probably the best place to get information on cramming," said Mitch Katz, FTC spokesman. "The FTC raised a lot of cases on cramming in the past," Katz said. "But I'm not sure of anything recent."

Neither agency's spokespeople had any suggestions for taxpayers who count on them for protection from illicit practices, or any answers for ConsumerAffairs.com, deflecting most questions with, "Just search our website for 'cramming.'"

The FTC does offer a hotline for businesses that have had charges from notorious crammer Epixtar, on their bills. The hotline is a 3-minute 13-second phone message that asks callers to send the FTC proof of Epixtar's charges.

Pamphlets

FCC

FTC

Carole Paynter, FTC senior attorney, said the case against Epixtar has a settlement in principle but that she wouldn't be surprised if there are still a few small businesses unknowingly paying for that service. She said those small businesses should be able to get a full refund by calling the 800 number that accompanies their charge.

Other than that hotline, Paynter said all the FTC offers cramming victims is a pamphlet.

The only time law enforcement has shown any interest in cramming is when the FBI was able to use cramming allegations to prosecute two alleged Gambino crime family members accused of bilking consumers out of more than $200 million.

Congress Unresponsive

Rep. Markey (right) with musician Moby

Congress appears to have turned a willfully blind eye to the problem it created. Remember, there were no third-party billing companies of any consequence until the Telecom Act enabled their creation.

Neither Rep. Ed Markey (D-Mass.), Rick Boucher (D-Va.) nor Joe Barton (R-Texas) returned repeated phone calls for comment on this story, although Markey had time to hold a press conference with Moby, a popular musician, to discuss "saving the internet." All three sit on the Subcommittee on Telecommunications and the Internet.

ILD is based in Ponte Vedra Beach, Florida. Florida Attorney General Charlie Crist announced a nationwide telephone billing probe three weeks ago. However, JoAnn Carrin, a spokeswoman from Crist's office said, "We currently do not have an (ILD) investigation at this time."

The Verizon Connection

ILD and its clients aren't the only ones deriving some benefit from cramming. The big local phone companies who handle the actual billing of consumers presumably make a few cents on each transaction. Their stance is that they're required by law to handle the billing but there are those, including Florida's Crist, who argue the local carriers aren't doing enough to police the process.

Not long ago, New York Attorney General Eliot Spitzer charged that Verizon wasn't doing enough to protect its customers from cramming. After an investigation, Spitzer and Verizon came to an agreement in April 2005 that gave New York's Verizon customers more protection from cramming. Under the agreement:

• Verizon must directly resolve consumers' complaints by removing unauthorized charges and blocking future charges.
• Verizon must terminate contracts with third parties that have persistent complaint levels.
• Verizon must ensure that each bill containing third party charges includes a toll-free contact number for consumers to call to question the bill.
• Verizon must provide credits for "crammed" third party services to consumers where credits have not already been given.

Although the Spitzer deal applies only to New York consumers, telecom companies claim it's having an effect throughout a broader region.

"Cramming (for Verizon customers) has gone down by over 50 percent," Ellen Yu, Verizon spokeswoman, said.

In Missouri, the attorney general advises that if you are a victim of cramming, you should:

• Immediately contact your local carrier, say you did not authorize the charges and ask that the charges be removed. Your local carrier has the authority to remove the charges, but it may require you to contact the crammer first to try to resolve the dispute. If so, ask for the crammer's phone number.

• Call the crammer and explain you did not request the services. Also, ask who authorized the services and request a copy of the document or tape recording authorizing the services.

• Ask that the charges be removed. If the crammer refuses or cannot be reached, inform your local phone carrier and say you did not authorize the disputed charges. Ask the local carrier to remove them.

It is also recommended you report your case to your state attorney general's office. If your AG gets enough complaints, he or she may actually be spurred to do something.

Taxpayer Revolt

Consumers, meanwhile, are growing weary of the negligent, go-to-hell attitude displayed by far too many state and federal lawmakers and agencies when asked what they plan to do to protect consumers from cramming.

"I believe the Telecommunications Act of 1996 should be repealed and telecommunication companies should not be allowed to add anything to a customer's bill without the direct consent of the person listed on the bill," wrote John of Eighty Four, Pennsylvania. "All attorneys general should investigate the practice of cramming and put a stop to it."

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