Northwest Nevada Telco is one of the smaller players in the major leagues of cramming, the shady means by which questionable charges are "crammed" onto consumers' phone bills. Congress created the problem -- presumably inadvertently -- through a provision of the Telecommunications Act of 1996. It has since shown no interest in correcting it.
When cramming charges appear on a customer's bill, they are usually accompanied by a company name and phone number. When the customer calls that number they are taken to a company such as Northwest Nevada Telco (NWNT). Basically, NWNT and similar companies work on behalf of their client, the crammer, to convince the consumer that the charge is legitimate.
NWNT also offers other services for cramming companies such as adult chat lines, billing services and, until recently, computer auto-dialers.
An auto-dialer, sometimes called a stealth dialer, is a computer program that uses an individual's phone-connected modem to call an Internet service provider (ISP). With the connection provided by the program, the user could access specific Internet sites, usually pornographic, and then have per-minute charges placed on their phone bills.
Although there is nothing illegal about offering services through an auto-dialer, it becomes illegal when the device dials the ISP without the consumer's consent and then starts racking up charges. In one case, notorious crammer One Call programmed the dialer to call on its own, possibly while the user was asleep or away from the computer.
In an interview, Jack Lawless, the owner of NWNT, insisted that his company has not done anything illegal. That's what everyone else in the long line of cram artists claims.
In all the cases against cramming companies, the local exchange carriers (LEC), such as Verizon and Bellsouth are rarely called to the stand. Neither are the companies that provide the so-called services (the company who designed and sold the auto dialer), the third-party billing companies such as ZPDI and ILD (the companies who place the charges) and the companies that provide the customer service (where the 800 number associated with the charge is answered).
What makes NWNT an interesting case is that it is several of those "other" companies rolled into one humble office building in Reno, Nevada.
How It Works
To help put this in perspective, we will continue with the One Call example. Until recently, NWNT sold auto dialers. Since the contract that exists between One Call and NWNT is not a public document, we'll say for the sake of simplicity that One Call purchased and used NWNT's dialer program.
The next step, according to a recent settlement against One Call and the Pennsylvania Office of Consumer Advocate, is that the consumer would accidentally download the dialer after clicking on a popup on the Internet. Then, without the consumer's consent or knowledge, the dialer would "hijack" the user's phone line-connected modem and start making long distance phone calls that usually carried a hefty per-minute charge.
One Call then sends its monthly charges to NWNT or another third-party billing company such as ILD or ZPDI.
The third-party billing companies, such as NWNT, have contracts with the LECs, such as Verizon, in which NWNT pays Verizon for the right to charge on Verizon's monthly bills. So then NWNT tells Verizon how much money to charge to a certain phone number according to what One Call tells NWNT.
It also normally takes a couple of months for the charge to appear on the consumer's bill, Lawless said. So an individual's computer could be making expensive phone calls for months before he or she would discover it.
Lawless said it takes months for the charges to appear because of the LEC's long billing periods and the long line of companies involved.
Once the cramming charges, such as those made by One Call, finally appear on the consumer's bill, they are often labeled as something innocuous such as, "Voicemail" or "Internet Access." There is also an 800 number. Many consumers, presumably, ignore the charge, which is usually small to begin with.
But oftentimes, the cramming company, according to NWNT ex-employees, would start multiplying the amount of the charge should a user ignore it or not notice it the first time around.
The Trail Leads to NWNT
So eventually, the user would call the accompanying 800 number. In that case, a company, sometimes NWNT, would answer the phone. According to the scripts customer service representatives (CSRs) at NWNT had to follow, they would then try to convince the consumer the charges were legitimate and try to retain the charge.
If the CSR is successful, the retained charge goes straight into One Call's account after the bill is paid.
However, according to the scripts, if a customer threatens to inform authorities, the CSR is to issue a credit. In that case, the customer is informed to pay the charge so they don't damage their credit and wait a few months for the credit to arrive.
Meanwhile, in those few months, One Call has had the use of the funds from consumers who many months before accidentally clicked on the wrong link. Even if One Call is brought into court and forced to give all the money back that it stole, it would get to keep the interest.
Thus, there are many companies involved, each of them claiming to be operating legally, each aiding and abetting the process of cramming.
Selling an auto-dialer is not illegal, nor is signing contracts with third-party billing companies. But almost everyone in the landline phone industry appears to make a lot of money off the whole tawdry scam of illegal phone bill charges.
Since many Internet users have done away with modems in favor of other broadband connectors, auto-dialers have almost become obsolete. But cramming is still a huge industry.
ConsumerAffairs.com receives numerous complaints every day from consumers who have been "crammed." But because of the complex chain of companies and the relatively small amount of each individual transaction, prosecutors are slow to pick up the scent.
Even when companies are caught by state and federal authorities, they are not sent to prison or forced into bankruptcy. Usually, they are required to refund some of their ill-gotten gains and made to promise to play nicely in the future.
NWNT's Lawless, like others in the cramming business, insists he is a legitimate businessman, even though his company has held contracts with some of the most infamous cramming companies in the industry's 10-year history.
Lawless claimed he has canceled contracts with companies he thought were crammers but, in an interview with ConsumerAffairs.com, would not share their names. He did share an e-mail he sent to one company, Opticom, expressing his disapproval of the scripts Opticom wanted NWNT's CSRs to follow.
Either way, Lawless insisted he and his company have done nothing illegal. It's not his job to police what his clients do, he said.
A Slothful Congress
While it may not be Lawless' job to police his clients' activities, it is the government's job to protect consumers from crammers, something it has seldom done. It was Congress that created the cramming industry through a clause in the Telecommunications Act of 1996. The measure was supposed to increase competition but instead it opened the floodgates for millions of dollars in shameful scams against hard-working Americans.
Terry Lane, outgoing spokesman for the Republican-controlled House Committee on Energy and Commerce suggested that cramming is not that big a problem and that Republicans have been fighting hard for other consumer telecom issues.
"I'm not aware of any hearings in the future and we didn't have any hearings in the past year or two," Lane said.
In a previous ConsumerAffairs.com article on cramming, published in June 2006, many of the House members -- both Republican and Democrat -- who created the problem simply refused to discuss it.
Reps. Ed Markey (D-Mass.), Rick Boucher (D-Va.) and Joe Barton (R-Texas) all failed to return repeated phone calls. All three sit on the Subcommittee on Telecommunications and the Internet.
The new Democratic Congress which will take over in January may be more willing to face the problem and possibly do something about it, though that is far from certain. The telecom industry plays Congress like a harp, and both Democrats and Republicans sing along lustily.
"Democratic leadership in the telecommunications policy will undoubtedly bring a renewed focus to consumer protection in choice and empowerment, all of which cramming would certainly be a part," said Markey's spokesman, Israel Klein.
For the time being though, companies can still make big profits by providing non-existent and unrequested "services" to the everyday consumer, usually without much or any federal or state interference.
Even if Congress bestirs itself to plug the cramming loophole, the criminal mind will find new ways to steal consumers' money.
One of NWNT's newer clients is www.powerpluscard.com, a Web site that claims to give anyone, regardless of employment status, a credit card with a "guaranteed $10,500 credit line.
One currently-employed NWNT CSR told ConsumerAffairs.com that people call all the time and scream at her about how they have been ripped off by Powerpluscard.com. She said she believes the Web site advertises something other than what is disclosed in the fine print.
It might not be cramming, but good luck to anyone who chooses to apply. You may want to keep NWNT's phone number handy.
Next: You've Been Crammed -- Now What?
Cramming: What It Is, How It Works...