Companies billing for unauthorized services are fined $11.7 million.

The FCC has proposed multi-million dollar fines against four companies for allegedly “cramming”: billing telephone customers for services they did not ask for. At the same time, the FCC issued guidelines to both telephone companies and the public about how to detect and prevent cramming, and plans to offer new rules against the practice.

Cramming problems usually relate to charges by third-party companies for services supposedly ordered by the phone company’s customers, and included on the phone bill. The FCC’s “Truth-in-Billing” rules require phone bills to include clear descriptions in plain language for each service, with a toll-free number for customers to question or dispute the charges.  Until a customer complains, though, the phone company has no way of knowing whether the charges are legitimate. This leaves it up to customers to review their bills for suspect charges. Knowing this, crammers sometimes try charging just two or three dollars a month, hoping that busy consumers won’t notice. The FCC’s Enforcement Bureau says thousands of people have fallen victim.

The FCC and the Federal Trade Commission (FTC) share responsibility for protecting consumers from cramming. The FCC has jurisdiction over the telephone carriers and other communications service providers. The FTC has jurisdiction over the third-party service providers whose charges (for things like chat lines, diet plans, etc.) are wrongly added to a telephone customer’s bill. The two agencies coordinate their enforcement activities to protect the public.

In the most recent cases, the FCC proposed fines ranging from $1.5 million to $4.2 million against four companies. (The individual “Notices of Apparent Liability” are here, here, here and here.)

All four companies provided a “dial-around” long distance telephone service in which customers paid a monthly fee for a certain number of long distance minutes. The customers could access the service by dialing a toll-free access number and then entering a PIN to make long distance calls – although, in fact, the vast majority never did. The monthly fees were nonetheless included in bills received by the consumers from their local telephone carriers. Some of the dial-around service companies cited by the FCC had common ownership and all, coincidentally, were based in Pennsylvania.

The companies claimed they had multi-step procedures for verifying each customer’s order for the dial-around service. Aggrieved customers responded that they had never heard of the companies before noticing suspicious charges on their phone bills. Records provided to the FCC by the companies showed that fewer than one-tenth of one percent of the customers who were billed actually used the service.

The FCC concluded that the companies had deliberately engaged in illegal cramming activities. Even if the actions were not deliberate, said the FCC, the companies should have known they were improperly charging people who hadn’t ordered their service, based on the large number of complaints (and possibly also based on the large number of customers who never used the service they were paying for).

Cramming is a violation of Section 201(b) of the Communications Act of 1934, which requires all charges for communications services to be “just and reasonable.” The Act authorizes the FCC to charge up to $150,000 for each violation. The FCC proposed fines calculated to exceed the allegedly fraudulent charges, to serve as a deterrent. In addition, the FCC will be monitoring these companies for future compliance, and threatens to revoke their operating authority if they continue cramming. Unfortunately for the affected consumers, these fines are remitted to the U.S. Treasury, and not to them individually. The customers who took the time to go through the complaint process at least have the satisfaction of knowing the four companies have been punished for their cramming ways.