Recap -- Unauthorized Charges on Telephone Bills: Why Crammers Win and Consumers Lose

On July 13, 2011, the Senate Commerce Committee held a hearing to examine reports of unauthorized mystery charges being placed on landline telephone bills, a practice commonly referred to as “cramming.” The hearing comes after a yearlong Commerce Committee investigation into cramming and its impact on American consumers.

Committee Chairman Jay Rockefeller told phone companies that they haven't done enough to crack down on “cramming.” Cramming, which usually takes place in the form of third-party billing, is “a scam that has cost customers billions of dollars,” Chairman Rockefeller said Telephone companies place roughly 300 million third-party charges on customers’ bills each year, adding up to some $2 billion in fees, according to a new report released by the Commerce Committee. Chairman Rockefeller noted that not all, but most, of the third-party charges are unauthorized.

AT&T made roughly $50 million from third-party vendors, who pay telephone companies for appearing on their bills, in one year, according to Walter McCormick, president of US Telecom. “It’s pretty obvious at this point that voluntary guidelines aren't solving this problem,” he said. Virtually every type of business and public entity is a confirmed victim of cramming, the report said. In defense of the telephone industry, McCormick told Congress about extensive efforts that his member companies undertake to fight cramming. He also defended the origin of third-party billing as pro-consumer. “Third-party billing had its genesis in a well-intentioned pro-consumer initiative by the federal government,” McCormick said. “The convenience of having all telecommunications-related services incorporated into a single bill was believed to be a pro-competition, pro-consumer requirement.” McCormick claims that AT&T achieved an 89 percent reduction in cramming between January 2010 and May 2011 due to enforcement efforts. Nonetheless, he agreed that “all parties in the billing chain need to elevate efforts to prevent consumer fraud” in light of the persistent problem and the growing sophistication of con artists and scammers.