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The Outrageous Ways Your Phone Company May Be Stealing from You

A growing number of scams are being perpetrated on telephone and Internet customers. Think you can easily identify bogus charges on your bill? Good luck.
 
 
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Cramming, slamming and ramming are three of a growing number of scams being perpetrated on unaware telephone, wireless and Internet customers.

In simplest terms, the major scams are defined as follows:

  • Cramming is the illegal practice of placing unauthorized charges on your local, long-distance or wireless telephone bill, usually by a third party not known to the customer.

  • Slamming is the illegal practice of switching a telephone customer’s long-distance service provider to another carrier without the customer’s permission.

These scams have been around for years but continue to be replayed on unwitting telephone customers. However, the newest scam, ramming, adds a new dimension to the game:

  • Ramming is the illegal practice by which a phone company‘s customer is put on a service plan or package s/he did not need or want or cannot even use. It includes the “gimme” when the advertised price is 20-50 percent less than what a customer is actually charged.

An estimated 80 percent of phone company customers have been overcharged or are on plans they did not need or even order. These and other scams can cost residential customers $20 or more a month extra and small business customers up to thousands of dollars a month.

Can you easily identify these charges on your phone bill? Good luck. Your bill is designed to be unreadable and most people just pay the total charge and go on with their lives. Is there any better way to rip off consumers?

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Cramming has been getting some attention recently. Early in January 2011, the attorney general of Minnesota, Lori Swanson, sued a Pennsylvania company, Cheap2Dial Telephone LLC, for illegally billing more than 2,500 Minnesota consumers since 2008 for long-distance services they didn't authorize or use. According to Swanson, a monthly charge of about $17 went mostly unnoticed on phone bills of these people. For three years, the scam totaled more than $1.5 million.

Last September, Willoughby Farr, of West Palm Beach, FL, received a 21-year federal prison sentence for cramming. From April 2003 to December 2005, while Farr was incarcerated in the West Palm Beach County Jail he used three West Palm Beach companies -- Nationwide Connections Inc., Access One Communications Inc., and Connect One Communications Inc. -- to defraud telephone customers of approximately $35 million in collect calls. Because the charges typically appeared on the last page of consumers’ telephone bills, people automatically paid the charges.

The charges often involve such non-basic services as voice mail, a one-time charge for entertainment services, or a non-recurring monthly charge.

Cramming has long attracted scam artists. In 2004, two alleged Gambino crime-family members were busted for running a cramming scheme that ripped-off phone customers for an estimated $200 million through bogus charges. The scam suckered consumers responding to ads offering free trials for dating services, adult chat lines and psychic consultants. Once the respondent’s name and number were captured, they were charged as much as $40 a month on their phone bills for services they didn't order and never used; the charges were billed under innocuous terms like "voice mail."

“Modem hijacking” is a variation on cramming. It takes place when software, typically delivered via a pop-up ad or free screensaver, is downloaded onto a computer via an Internet connection, and uses connecting software to illegally reroute the computer connection to a different service provider. However, online fees associated with the new connection are often far more expensive.

Slamming, the practice of switching a telephone customer’s long-distance service provider to another carrier without the customer’s permission, has also attracted sophisticated scam artists. While the Federal Communications Committee (FCC) and state regulators have helped curb the practice, it still persists.

In May 2010, Silv Communications, a Los Angeles based interexchange carrier that routes and processes Internet telephone services for small businesses, was fined $1.4 million for deceptive practices. According to the complaints submitted to the FCC, Silv telemarketers, who claimed to represent AT&T, offered respondents a deal they couldn’t refuse -- they only had to switch to another long-distance provider.

In 2008, the FCC imposed a $5.1 million forfeiture action against Las Vegas-based Horizon Telecom for slamming. Earlier, in 2005, Sprint agreed to a $4 million FCC consent decree to resolve a slamming investigation.

“Sliding” is a form of slamming. It takes place when a phone company uses a customer's request for a change in service to add, change or “slide” the customer to an unauthorized telephone service. For example, a customer may request to change their long-distance service provider. When the customer receives their telephone bill, they discover that their regional toll service was also changed, but without the customer’s permission.

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Ramming, a term coined by Bruce Kushnick, is the biggest and most unknown of these scams. It takes place when an existing phone company customer is put on a package that s/he did not need or want or cannot even use. The customer is usually offered a special price discount that has nothing to do with the actual costs a customer pays. Three examples from New York small businesses who are Verizon customers illustrate how the scam works. (The companies’ phone bills were audited by Teletruth.)

  • A local fruit and vegetable grocer was put on an international calling plan along with unlimited local and long distance calling plan, but made no calls. The overcharging came to $750 annually.

  • A 24-hour grocery store with only one phone line was put on a plan promoted as an “unlimited toll call” package that included caller ID and voice mail. Unfortunately, the grocer did not have a caller ID-capable phone (and didn’t order the package), nor did the grocer know what a “toll call” meant. The store only needed “basic” POTS (i.e., plain old telephone service) and was overcharged $52 a month.

  • A local deli has a two-line service. One line is dedicated to an ATM machine but was bundled with four different transaction packages, including two “Centrex” services with features that were never turned on and couldn’t be used on an ATM line. The second line was an unlimited package for local, long distance and toll calls as well as two packages of calling features. The customer never ordered any of these services and the overcharge was $72 a month -- and this racket went on for six years!

Ramming is not limited to small businesses. Larger companies, non-profits, school boards and municipalities are systematically ripped-off up to $20,000 to $50,000 a year. An audit of a Washington DC telecommunications firm found over $10 million in missing lines and other overcharges.

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Be wary of the too-good-to-be-true gimme, as it usually is a come-on for ramming. One of the more annoying features of a gimme is when the customer orders a service and they learn they were not told the truth about the total costs. On an average advertised plan, the difference can be 20-50 percent more money for the service in addition to a litany of one-time charges that were not discussed in detail or itemized when the customer purchased the plan.

Another annoying feature takes place when the customer purchases something offered as a special promotional offering and doesn’t realize that it expires in 30 days to one year. Most often, such a special comes with unstated price hikes up to 50 percent that kick in when the offer expires. One of the newest scams is shifting customers from traditional “month-to-month” plans to “contracts” that obligate them to one-, two- or three-year agreements; if one “breaks” the contact, one incurs exorbitant penalties.

One would think that Congress, the FCC or even state public utility commissions (PUCs) would have addressed some of these egregious acts. They have, sadly, abdicated their obligations, only serving the interests of the telecom companies. The FCC, for example, doesn’t even use actual phone bills in its creation of the rate information, relying instead on self-serving corporate “data.”

For more on cramming, slamming and ramming, visit Teletruth’s Web site, www.teletruth.org.

David Rosen is a regular contributor to CounterPunch and Z-magazine. Bruce Kushnick is a telecommunications industry analyst who serves as the broadband and telecommunications expert for Harvard Nieman’s Foundation for Journalism’s Watchdog, and a founding member of Teletruth, a customer advocacy group.
 
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