After years of consumer complaints, one state - Illinois - is close to outlawing a practice known as "cramming," which results in unauthorized charges being placed on consumers' phone bills.
Illinois' House of Representatives voted 105-0 to ban third-party companies from placing charges for services, many of them non-existent or unwanted, on consumers' bills. The measure next goes to the Illinois Senate where passage is expected.
“Phone cramming is a multibillion-dollar business for con artists who sneak unauthorized charges onto unsuspecting customers’ bills, affecting everyone from residential users to small business owners, even nonprofit organizations and government agencies,” said Illinois Attorney General Lisa Madigan. “The only way to put an end to this scam is by instituting a ban on third-party charges on our phone bills.”
Conflict with the feds?
While Madigan may be right, the legislation, if passed, is almost certain to be challenged in court, since it would undo a feature of federal legislation. The Telecommunications Act of 1996 allows third-party service providers to market their services to consumers and place the charge for those services on the consumers' residential phone bill.
Congress intended the legislation to promote competition for services, which it expected to be good for consumers. But like much of what Congress does, there have been unintended consequences.
Scam operators have used the law to charge consumers for voice mail service, website design and hosting, and other services they neither want nor agreed to.
"I received a bill for $12.95 with $.81 taxes from I Tech PC Support for a monthly fee on Feb 19,2012, on my Frontier phone bill. I never requested this or know this company," Tom, of Hamilton, Ohio, wrote in a post on ConsumerAffairs.
Ban on third-party billing
The Illinois legislation seeks to end the practice of "cramming" by banning all billing by a third-party company. It hopes to avoid a conflict with the federal statute by allowing for limited, common sense exceptions for legitimate services.
Madigan says estimates indicate that telephone companies place at least 300 million third-party charges on their customers’ bill each year. According to a U.S. Senate Commerce Committee report, third-party billing generates at least $2 billion annually.
Phone cramming scams originally were perpetrated primarily through telemarketers, especially before the Do Not Call registry was established. More recently, however, the scam has flourished online.
Internet users report simply submitting their phone number, among other personal information, for online prize drawings, surveys or free recipes. Weeks or months later, consumers find charges on their phone bills for unauthorized services.
To date, Madigan says she has filed 30 lawsuits against crammers, representing more than 200,000 Illinois businesses and residences who were victim to these phone billing schemes. Among the most glaring of targets for these scams was cited in Madigan’s 2009 lawsuit against US Credit Find Inc., a Venice, Calif.-based operation, which crammed a Springfield public library’s dial-a-story telephone line.
Madigan has testified before Congress, urging federal legislation to ban cramming. Congress, however, has failed to amend the law that allows it. Illinois is now attempting to hang up on crammers at the state level.