Looking to throttle the multi-million dollar industry known as mobile cramming, the Federal Trade Commission today issued a report outlining five key steps carriers and legitimate third party providers should do to stop the fraud.
The FTC report focused on “carrier billing,” the placement of charges for goods and services of third-party merchants on a mobile phone bill. “Mobile Cramming: An FTC Staff Report” includes recommendations aimed at mobile carriers, merchants who offer goods and services charged directly to mobile phone bills, and billing intermediaries known as aggregators who facilitate the placement of such charges on mobile phone bills.
"To combat cramming effectively, it is not sufficient to rely on consumers to identify unauthorized charges, particularly since many consumers do not know that third parties can place charges on their mobile bills, and that third parties can do so even if the consumer provides no credit card or other payment information. Rather, an effective strategy requires participation by all entities involved in third-party bills -- including mobile carriers, billing aggregators, and payment processors," the FTC said.
The FTC report notes that mobile bills can include legitimate add-on third-party charges such as charitable contributions, others may be crammed onto consumers’ bills by scammers. The report notes that while the full scope of mobile cramming is not known, but just three cases brought last year by the commission against mobile crammers led to more than $160 million in judgments. One of the biggest ongoing cases right now is the one the FTC has brought against T-Mobile which alleges the carries charged consumers monthly fees for third-party services that in many cases the subscribers hadn't ordered. Cramming charges are also part of that pending case.
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Specifically, the new FTC report calls for:
More rights: Giving consumers the right to block third-party charges. FTC staff calls on mobile phone carriers to give consumers the right to block third-party charges on their mobile bills altogether, and to inform consumers clearly and prominently of that right. Carriers should inform consumers of this right not only when consumers create their account, but also on an ongoing basis.
No deception: Ensuring that advertising, marketing, and opt-in processes for charges are not deceptive. Advertising, marketing, and opt-in processes for third-party mobile account charges should be clear about how much and how often a consumer will be charged. Mobile carriers should closely monitor the merchants placing charges through their bills to scrutinize whether they are risky or suspicious, and if so, take steps to prevent them from placing charges.
Consenting bill payers: Getting express, informed consent before charging consumers. Consumers’ express, informed consent must be obtained before placing charges on their mobile phone bill, and reliable records of that consent should be kept. Carriers should closely monitor refund rates, consumer complaints and other signs of possible cramming and take action where necessary.
Show me the charges: Clearly displaying third-party charges on bills. Mobile bills should clearly and conspicuously show third-party charges. Carriers should consider steps to make third-party charges more prominent, such as separate billing lines for third-party charges that make it clear to consumers which charges are directly from a carrier and which are from a third party. In addition, mobile carriers should give consumers using pre-paid calling plans who do not otherwise receive bills from their mobile carrier to receive specific notification that a third-party charge is being deducted from their account.
Put up your dukes: Creating an effective process for resolving disputes. Finally, mobile carriers should put in place an effective dispute resolution process that gives clear information to consumers about how to dispute suspicious charges and seek refunds for unauthorized charges. As the report notes, consumers have often complained that carrier refund processes are difficult and inconsistent. In addition, the report calls on carriers, where possible, to give consumers who were crammed refunds of recurring monthly charges including previous months, and when a third-party is stopped from billing due to cramming, to notify consumers whose bills were charged so they can seek refunds for those charges.
“In addition to these recommendations, the report notes that after the Commission’s 2013 mobile cramming roundtable and FTC and state enforcement actions to combat mobile cramming, there has been a move away from premium SMS billing, which typically relies on text messages ostensibly sent to consumers to initiate charges. In place of premium SMS billing, the report notes a trend toward what is called direct carrier billing, in which charges can be placed on a consumer’s mobile bill through a mobile website or app. While major carriers have moved away from premium SMS, the report notes that the recommended consumer protections should apply to direct carrier billing or any other mechanism for placing third-party charges on mobile phone bills,” the FTC stated.
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