Bogus cellphone charges ‘a billion dollar industry,’ claims Senate report

A staff report from the Senate Commerce Committee is sounding the alarm about bogus charges on cellphone bills that it says are costing consumers “hundreds of millions of dollars.”

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The report takes aim at wireless or mobile “cramming,” where consumers are hit with unauthorized charges for things like ringtones or daily horoscopes.

“For as long as they have been giving outside parties access to their customers’ bills, the major phone companies have assured Congress and the public that they are protecting their customers from billing fraud. ... But this report makes it clear that is not the case,” Senate Commerce Committee Chairman Jay Rockefeller (D-W.Va.) said in a statement announcing the report.

“Cramming on wireless phones has been widespread and has caused consumers substantial harm,” he continued.

The staff report describes mobile cramming as “a billion dollar industry” that “has likely cost consumers hundreds of millions” at the benefit of the wireless companies, which keep 30 to 40 percent of the charges.

Though wireless companies have “been on notice at least as early as 2008” about the charges, their “anti-cramming policies and sometimes lax oversight left wide gaps in consumer protection,” the report said.

The carriers continued to allow suspicious third-party companies to bill consumers and didn’t stop scammers from skirting billing authorization requirements, according to the report.

While the major wireless carriers agreed last year to curb “premium” text messages — which they said constituted the bulk of unauthorized charges — the report points out there are other cramming methods, including “direct carrier billing.”

It encouraged the wireless industry and policymakers to keep an eye on the “relatively nascent” direct carrier billing methods to “evaluate the consumer protection gaps that have enabled widespread deceptive and fraudulent charges to be placed on consumers’ landline and wireless bills.”

The report included information about cramming charges from the wireless carriers including AT&T, Verizon, Sprint and T-Mobile.

T-Mobile is currently the subject of a Federal Trade Commission lawsuit and Federal Communications Commission investigation over cramming charges.