Cramming: How bogus fees hit your phone bill

iqtesthomeThis scam IQ test on Facebook asks unwitting test-takers for a mobile phone number and hides the part that says they're going to get charged $9.99 a month for text message services.

No longer do scam artists need a credit card number. Now, they just need your name, phone number, and a mouse click.

Until he got a notice saying his phone was about to be cut off, Jim Cudahy didn't know he was being charged an extra $14.95 each month on his Embarq bill, which he was automatically paying through a bank draft.

When he called to ask about the charge, Embarq said it was from a third-party provider for an additional voicemail account. The problem was: Neither he nor his wife remembered ordering anything of the sort.

After racking their brains to figure out what triggered the charge that had been on their bill for 10 months, his wife recalled signing up last December for an online grocery coupon.

And that's when they learned about "cramming," the practice of slipping unauthorized charges on telephone bills. When Cudahy told acquaintances what happened, he learned another popular example of cramming is a supposed IQ test on Facebook that has people unwittingly signing up for a $9.99 a month charge.

Cudahy is alarmed by how widespread cramming is and by how easily a charge can end up on one's phone bill, and he feels particularly violated that it showed up on Embarq bill.

"It seems with your home phone company," he says, "there should be some level of trust."

Embarq spokesperson Vernon Fraley says that he too was once a victim of cramming, having found a $10 monthly charge on his account after what he thought was a simple magazine subscription.

Fraley says that third-party billing is a legitimate practice that can provide convenience to the customer while allowing smaller companies to compete in the telecommunications biz without the overhead of their own billing. A legitimate example, he says, would be international calling.

Officially, no charge can appear on a customer's bill without the customer's authorization. However, the sneaky part in cramming is that the authorization lies in the fine print, so the customer may have no idea that in clicking a pop-up ad or taking an online survey, she's also opened the door to an ongoing charge.

"It's unethical and unscrupulous," says Fraley.

So how did the company that billed Cudahy get past Embarq's gatekeepers?

Fraley says Embarq holds third-party vendors to high standards. Before they are approved to begin placing charges on customers’ bills, prospective third-party vendors must provide sales and marketing materials, show appropriate state registrations, and meet all regulatory guidelines.

"The customer needs to read the phone bill to make sure it's accurate," says Fraley. "There is recourse. We provide a number to call to dispute a charge."

Fraley notes that customers can also block third-party charges from their phone bills. And vendors are required to promptly resolve customer inquiries.

Indeed, Cudahy confirms that he had no problem– "they didn't put up a smidgen of a fight"–  getting a refund.

The firm that charged Cudahy is ESBI– Enhanced Service Billing Incorporated. In 2001, ESBI settled a Federal Trade Commission complaint for cramming and claiming customers had to pay unauthorized charges. As part of the settlement, ESBI was barred from illegally billing customers in the future.

Yet ESBI appears to continue to bill for third-party providers of services that victims say are nonexistent and/or unauthorized. A Google search turns up numerous complaints about allegedly bogus billings from ESBI to Verizon and AT&T customers, as well as Embarq's.

ESBI gives out virtually no contact information on its sparse website. A call to the company using the number on Cudahy's bill reached customer service reps in San Antonio, Texas, who, though  unfailingly polite, refused to give out any company data.

"We are unable to provide that," says Alice, a supervisor, who also was unable to provide her own last name or a phone number where her company's upper management might be reached.

According to the FTC, ESBI was sold in 2003 by Platinum Equity LLC to another private equity company, Abry Partners in Boston. Abry had not returned a phone call at press time.

Telephone companies are regulated by either the Federal Communications Commission for interstate matters or the Virginia State Corporation Commission if intrastate. And unauthorized charges that are not phone-related go to the Federal Trade Commission.

The FCC provides a fact sheet on cramming and in Virginia, most complaints go to the SCC, which in 2008 received 114 complaints about cramming (and 56 on slamming, the unauthorized changing of a telephone service provider).

Of last year's 114 cramming complaints, 9 were about Embarq, 9 were ESBI, 1 was for Enhanced Services, which sounds like ESBI, and 49 were complaints about Verizon.

So far this year, the SCC has received 111 cramming complaints: 22 about Embarq, 5 on ESBI, and 59 for Verizon.

The SCC has information on cramming on its website, and advises customers who don't get satisfaction from calling the company that put the dubious charge on their phone to call the SCC at 1-800-552-7945.

The SCC also provides a copy of a May 25, 2007, letter from Embarq that says it requires a "significant" deposit from third-party providers and tracks the number of monthly customer complaints, and that "fraudulent billing" can result in contract termination.

That's not enough to placate Jim Cudahy. "I'm taking steps to switch to Comcast," he says. "I don't want to be associated with Embarq. To click on a pop-up, that's one thing. But that the phone company is involved, that's another thing."

And as for the online grocery coupon that his wife signed up for that launched the months of unauthorized charges, Cudahy has another revelation: "She never got the coupon!"

Read more on: crammingembarqesbi


What is really crime is how those other fees appear without our consent. The govt loves to spend our money much like these scammers.

it amazes me that it takes any person 10 months to catch on to the scam. This garbage was tried on my daughter's cell phone bill to the tune of $9.99 a month. When you pay for a flat rate for an unlimited phone and data plan on a Blackberry, it's not real hard to notice that somebody has tacked on $9.99 since the last billing cycle.

Yep, they're counting on people not noticing. It's really sneaky and underhanded. I'm the only person in my household and somehow I got signed up for some voice mail service to the tune of $40 a month, billed through Verizon. I never sign up for sweepstakes or coupons or anything.

At first Verizon said I had to contact the company (I think it was ESBI). I told them I wasn't going to do that, Verizon is asking for my money, Verizon allowed the charge, Verizon can take away the charge. Supposedly they blocked third-party billing on my account, time will tell.

You'd be suprised how it can go unnoticed. Our cell phone bill wasn't a set amount, and for almost a year, we were charged $9.99 a month for something or another. When I contacted the cell-phone company, they helped us cancel the charge but couldn't refund our money. When I contacted the company itself, they said there was a double opt-in process and for that reason, they would refund our money. After a report to the Better Business Bureau, we got about half back ... we still don't know where we supposedly signed up for this, but you can bet that I pay a lot more attention to our cell-phone bill now.

Don't people bother to look at their bills?? Ya, 3rd party vendors can charge on your phone bill, thats the law. So don't go blaming the phone company. The same goes for your bank account. Think about it, we do clearing house transactions all the time, credit card payment, mortgage payment, insurance payments, car payments and others. The bank accepts them because thats the law. Someone has your bank routing number and account they can debit a small amount and you probably will not miss it.

@hah! Other fees like what? The taxes? Those taxes are voted upon by congress, the problem is they are rolled into large bills.

Where I really get mad are all the little user fees, that the FCC allaows them to tack on. Then they lie to you and say the FCC tells them they have to put them on. Which is not true.

We the consumer only exist to provide loser non-competitive corporations money to give CEO's outrageous salaries for being losers.