Senators call for tough new measures to fight 'cramming'

By Brendan Sasso - 07/13/11 12:42 PM ET

Senate Commerce Committee Chairman Jay Rockefeller (D-W.Va.) promised Wednesday to introduce legislation that would curb unauthorized charges on consumers' phone bills, a practice known as “cramming.”

“It’s pretty obvious at this point that voluntary guidelines aren’t solving this problem,” Rockefeller said. “It’s time for us to take a new look at this problem and find a way to solve it once and for all.”

Sen. Kelly Ayotte (R-N.H.) echoed Rockefeller’s call for aggressive action. “Without a strict deterrent or fear of retribution for those scamming the public, we are not fully addressing this issue,” she said.

Rockefeller noted that Congress held hearings on cramming in the late 1990s, and telecommunication officials assured lawmakers then that they would address the problem.

But more than a decade later, hundreds of companies continue to place tens of millions of dollars of unauthorized charges on consumers’ landline telephone bills every year, according to a committee report.

Walter McCormick Jr., president and CEO of the U.S. Telecom Association, agreed that cramming is a significant problem, but Rockefeller grilled the industry representative over why telephone companies have not done more to end the practice. “Why haven’t you cleaned up your act?” Rockefeller asked.

“We agree that this is a continuing problem that needs to be addressed,” McCormick said.

Sen. Claire McCaskill (D-Mo.) asked McCormick how much money the phone companies make on cramming.

He said that the telecommunications industry makes about $200 million every year on third-party charges, and that AT&T alone makes about $50 million per year. He emphasized that some of these third-party charges are legitimate and that the money represents a small portion of overall industry revenue.

Illinois Attorney General Lisa Madigan urged senators to ban all third-party charges on phone bills. She said that in her investigations into cramming, she has yet to find any legitimate third-party charges on landline telephone bills.

McCormick said that he would speak with telephone companies to find out whether they would support a complete ban on third-party billing.

Some people unwittingly enroll in services by submitting their phone number to companies online or by agreeing to services over the phone. Others never did anything to participate in the programs but are charged anyway.

A yearlong investigation by the committee uncovered numerous examples of cramming — in some cases, third-party vendors enrolled deceased people in their programs and billed family members. Senior citizens who had never used the Internet were billed for webhosting services.

The hearing came just one day after the Federal Communications Commission proposed new rules to help consumers identify unauthorized charges on their phone bills.