Minnesota Accuses Firm Of 'Cramming' Consumers' Phone Bills

When Minnesota consumers opened their telephone bills to find over $15 a month in long distance calling minutes they didn't recall using, they called their attorney general.

As a result, Minnesota Attorney General Lori Swanson has sued a Pennsylvania-based company that she accuses of "cramming" customers' phone bills.

"Cramming" is the practice by which third party vendors put unauthorized charges on a person's phone bill.

"The company slipped unauthorized charges onto people's phone bills," Swanson said.  "Cramming works because most people don't realize that their phone bill can be used like a credit card. Because phone bills are long and hard to read, people don't always catch unauthorized charges."

On the rise

Cramming complaints are on the rise nationwide. The Federal Trade Commission recently called cramming "a significant area of recent consumer complaint," and the Federal Communication Commission (FCC) recently said, "It's a problem that's on the increase right now."

The FCC reported receiving 6,714 cramming complaints in 2009, up from 1,761 in 2005.

Cramming scams were common in the 1990s but eventually receded following a wave of federal and state crackdowns. They are now on the uptick again due to several factors, including the hard-to-read nature of consumer phone bills; the rise of so-called "billing aggregators" that facilitate the posting of charges; and phone companies themselves, which make money by allowing third parties to put charges on customers' phone bills.

In October, 2009 Swanson asked the FCC to promulgate new rules to curb cramming practices, and today she shared the results of her investigation with the FCC. Sen. Amy Klobuchar (D-MN), who joined Swanson at her announcement of the lawsuit, said that the U.S. Senate Commerce Committee is actively investigating phone companies for their role in telephone cramming. In November, Klobuchar called on the FCC to take steps to crack down on the practice.

Taking advantage of technology

"New technology offers more convenience for consumers, but it also offers crooks new opportunities, such as cramming," said Klobuchar. "We need to do more to crack down on this fraudulent practice and prosecute those who engage in it. I commend Attorney General Swanson's work in this area and I will continue to work with her and other federal and state enforcement officials to protect consumers from these scams."

Swanson's lawsuit against Cheap2Dial Telephone, LLC alleges that the company placed charges of over $15 for "dial around" long distance calling minutes on the phone bills of Minnesota residents without their authorization. "Dial around" long distance calling minutes are similar to using a calling card to make long distance calls, minus the actual calling card.

Of the 2,567 Minnesota customers who Cheap2Dial billed since 2008, only nine people  actually used the company's services to make a long distance call, Swanson said.

When the Attorney General's Office asked Cheap2Dial to produce verification that consumers knowingly signed up for the company's services, she said the company supplied the wrong information for many consumers, including incorrect names, emails, and birthdates.

Cheap2Dial's monthly fees ranged from $13.97 per month (for 358 calling minutes) to $14.97 per month (for 383 calling minutes), plus fees and taxes that push the total monthly charges to over $17.