Wireless carriers that bill for services through local phone companies may be affected by cramming, the latest consumer billing scam to hit the telecommunications industry.
Cramming is when customers are charged for services they didn’t order from communications companies other than the local phone provider on their phone bill. While once relatively unheard of, the practice has replaced slamming-the practice of switching a consumer’s long-distance provider without consent-as the top consumer scam complaint, according to the National Consumer League.
“Cramming is the fastest-growing complaint at our fraud center,” said Cleo Manuel, vice president of public affairs for the National Consumer League. Manuel estimates cramming is in the top three complaints from customers. “It’s huge.”
Charges for paging services that were not ordered and not received are common in cramming scams. Sometimes it is as simple as a telemarketer looking to pad the number of customers he sold service to in a day-and thereby increase his commission-by fraudulently marking a few names on his call list as purchasing the service.
More common and pernicious is when the entire telemarketing firm is involved, usually by creating an elaborate and confusing phone pitch that tricks customers into agreeing for the service.
Finally, the billing aggregator could be the culprit, by sending bill charges to the phone company for paging services that no one ever ordered.
In all instances, the phone company’s customers pay the bill, the phone company turns over money to the billing aggregator, and either the billing aggregator pockets the cash or turns it over to the paging provider, which then pays the telemarketing firm a commission on the bogus sale.
Meanwhile, customers have no pager and no pager service. Consumers often think the charge is just one of the many ancillary charges of the local phone provider.
Many times, paging services are listed on the bill as “enhanced services,” which can be even more confusing because customers who are knowingly paying for one level of paging service may get crammed into unknowingly paying for advanced paging services they are not receiving, such as value-added information services.
“What happens is just con artists find the phone bill as a convenient way to get money,” Manuel said.
Mary Halula, U S West Inc.’s product manager in charge of reviewing the company’s billing aggregator accounts, said honest service providers that unknowingly do business with unscrupulous marketers or billing aggregators stand to lose themselves because an unwatchful carrier can get a reputation of being involved in a cramming scam.
“You’re not only out of money, but you get adverse publicity of having your name on that bill,” she said.
There are several ways paging providers can protect themselves. First, they should ensure the name under which they are billing is easily recognizable as a paging fee.
“Make clear on the bill who is charging and for what. Don’t use a name not easily understood and if there’s a number on the bill, make sure it’s the number for the paging company,” Manuel said. “Consumers want to know what they’re getting and they don’t want to be tricked.”
Another prudent move is to check the background of the marketing firm and billing aggregator before signing a contract with them. When entering into a contract, many providers check for issues like financial solvency, but often neglect to check up on the company’s reputation, said U S West’s Halula.
First check with the Better Business Bureau or the Attorney General’s office for the number of complaints against the company, she said. Also, check to see how telemarketing companies compensate their employees. Are their telemarketers compensated by the number of customers signed on, or are they billed only after the sale has been deemed solid? According to Halula, it is less likely that cramming charges will appear from a company that does business the second way.
“Insist they compensate marketing people downstream rather than up front,” she said.
More than just protection, these steps also help ensure the phone company agrees to add the paging provider’s services to its list of third-party billers.
Phone service providers want to offer their customers the ability to pay for multiple services on one bill as a convenience without exposing their customers to fraud. With cramming complaints on the rise, phone companies are becoming more selective about who they allow to add charges on their bill, especially because the first person a crammed customer complains to is the phone company.
Phone providers like U S West and BellSouth Corp. require prior approval of all contracts between billing aggregators and service providers. This way, the local phone provider can determine the marketing plans of the service providers that want their charges added on the phone provider’s bill and can reject those it feels are confusing or outright scams.
U S West has been doing this for some time now, and BellSouth recently made the changes, including a three-month moratorium on any new third-party billing.
