Senate Commerce Committee Releases Report on Unauthorized Charges on Telephone Bills

Senate Commerce Committee Chairman John D. (Jay) Rockefeller IV revealed the findings of a yearlong Committee staff investigation into a nationwide epidemic involving mystery fees being placed on consumers’ landline telephone bills without their knowledge or consent. The investigation shows that this practice could be costing Americans $2 billion a year, that the nation’s largest telephone companies are profiting from it, and that third-party landline telephone billing has largely failed as a legitimate method of payment.

“This report is a stark picture of a billing system that is hurting consumers and making profits for phone companies,” Chairman Rockefeller said. “Despite industry promises to end this fraudulent practice years ago, hundreds of third-party billing companies have continued to place unauthorized mystery charges on consumers’ phone bills for services they do not want or use. In exchange, they reap tens of millions of dollars a year in profit. This fraud against millions of American consumers, businesses and even government agencies is utterly reprehensible. It’s time for us to take a new look at this problem and find a way to solve it once and for all.”

Key findings:

• Third-party billing is a billion dollar industry. On a yearly basis, telephone companies place approximately 300 million third-party charges on their customers’ bills, which amount to more than $2 billion worth of third-party charges on telephone bills every year. Over the past five years, telephone companies have placed more than $10 billion worth of third-party charges on their customers’ landline telephone bills.
• Most third-party charges appear to be unauthorized. The evidence obtained through the investigation overwhelmingly suggests that a large percentage of these charges are unauthorized cramming charges.
• Telephone companies profit from cramming. Over the past decade, telephone companies have generated well over $1 billion dollars in revenue by placing third-party charges on their customers’ telephone bills. Over the past five years, AT&T, Qwest and Verizon have earned more than $650 million through third-party billing. Verizon explained that it “receives a flat fee between $1 and $2 per charge for placing third-party charges” on its customers’ bills. Because telephone companies generate revenue by placing third-party charges on their customers’ bills, telephone companies profit from cramming.
• Cramming affects every segment of the landline telephone customer base. Unauthorized third-party charges harm residences, small businesses, nonprofits, corporations, government agencies, and educational institutions. The Committee has accumulated thousands of examples of cramming on nonresidential telephone bills.
• Many third-party vendors are illegitimate and created solely to exploit third-party billing. Committee investigators have found third-party vendors operating out of post office boxes, fake offices, and apartments, with “presidents” that know nothing about their “companies.”
• Telephone companies are aware that cramming is a major problem on their third-party billing systems. Over the past five years, more than 500,000 customers have contacted Qwest, Verizon and AT&T and to complain about cramming.
• Telephone customers often reported negative experiences when seeking assistance from their telephone companies. Consumers and businesses frequently reported that the telephone companies’ sales representatives provided little to no assistance when they called about unauthorized third-party charges.
• The telephone companies’ anti-cramming safeguards have largely failed. Telephone companies have inaccurately used low complaint statistics to show cramming is not a problem and to prove that their customers appreciate the convenience of third-party billing.