Remember the days when “cramming” was something we did before an exam or around the picnic table after a company softball game?
Now, the term has taken on an entirely different meaning – one that has been in the news of late with the Federal Trade Commission’s much-publicized lawsuit against T-Mobile, which is on track to become the nation’s third-largest wireless provider if its merger with Sprint passes regulatory muster.
Two weeks ago, the FTC accused the company of making “hundreds of millions of dollars” at its customers’ expense from 2009-13 by engaging in “cramming,” which is the practice of charging for third-party text-messaging services without the consumer’s knowledge.
What kind of services are we talking about?
Think celebrity gossip, daily horoscopes, ringtones, romance tips, trivia and like – typically at a disguised monthly fee of $9.99.
The FTC maintains that not only did T-Mobile keep between 35 and 40 percent of the money derived from these services, but it continued to engage in this practice years after realizing the charges weren’t legitimate.
For its part, T-Mobile called the FTC’s complaint “unfounded and without merit,” arguing that it stopped billing for these services last year and began issuing full refunds to customers who felt they were billed inappropriately.
Despite all the recent attention, cramming is not a new phenomenon. It’s been around for at least a decade, dating back to the time telephone companies were granted permission to generate new revenues by billing for third-party companies.
The Federal Communications Commission reported a few years ago that between 15 million and 20 million American households were subjected to cramming each year – and that only one in roughly 20 ever knew about it. One FCC investigation determined that only 20 of 17,384 consumers used the service that showed up on their monthly bills, a usage rate of 0.1 percent.
Nor is T-Mobile the first phone company to face legal action over cramming. Verizon, the nation’s largest wireless carrier, settled a class-action lawsuit over cramming in 2012. A year later, No. 2 AT&T settled its class-action suit over allegations that it, too, billed customers for outside services without its customers’ knowledge or consent.
Still, the FTC’s action against T-Mobile is believed to be the largest such case ever brought by the federal government. While the agency has taken action against nearly three-dozen companies over this practice, this is the first time it has gone after an actual phone carrier.
In conjunction with its complaint against T-Mobile, the FTC issued a consumer advisory explaining cramming and advising consumers how to protect themselves against this deceptive practice. Among the agency’s recommendations:
- Read your monthly phone bill – carefully: No, it won’t ever make the New York Times’ best-seller list, but perusing your bill line by line is the best defense against paying for services you never requested. Be particularly watchful for generic words and phrases such as “minimum use fee,” “activation,” “member fee” or “subscription.” And pay special attention to those parts of your bill labeled “miscellaneous” or “third-party” charges.
- Block third-party charges: The FTC says many carriers offer this service at no charge, so it may be as simple as just asking for it.
- Know your carrier’s policies on refunds and fraudulent charges: Some carriers have a deadline for refund requests, say 60 days, while others may offer at least a partial refund for fraudulent charges regardless of when they occurred. Find out.
- Be vigilant if you have a prepaid phone plan: Check your account regularly to be sure you aren’t losing some of your precious minutes to third-party service charges. Either check your account online or call the appropriate number provided by your carrier to access your account.
Nick Pappas is assistant business editor at the Albuquerque Journal and writes a blog called “Scammed, Etc.” Contact him at email@example.com or 505-823-3847 if you are aware of what sounds like a scam. To report a scam to law enforcement, contact the New Mexico Consumer Protection Division toll-free at 1-800-678-1508.