FTC sets sights on scammy "crammers" who bill your phone a fortune for services you don't need, want, or use

Ars Technica's Nate Anderson writes about the FTC's lawsuit against Streaming Flix and its billing partner, Billing Services Group. The companies are accused of putting random charges on peoples' phone bills through trickery (fine-print in seemingly unrelated signups) or outright fraud (simply adding charges to random phone bills, like a local public library's storyline, which plays recordings of stories to callers). The companies have taken millions out of phone-line owners' pockets in a fairly brazen ripoff, and the carriers are unwilling to take any real action against them because -- naturally -- they get a cut.

As the middleman, BSG makes similar claims about being duped, but the new FTC complaint tries to show that the company had ample reason to know it was aiding a fraudulent enterprise. (These claims are detailed, extremely detailed, in a 45-page appendix to the original FTC complaint). For instance, the FTC says that BSG saw the "astronomical refund rates" requested by Landeen's "consumers," including a 60 percent refund rate on the voicemail products alone. BSG was also notified that major carriers like Verizon and AT&T were cutting off various Landeen products at different times due to the complaint rates that the telcos themselves were seeing.
What about BSG's "strict protocol" and "100-point review process"? According to the FTC, the company did evaluate Landeen's businesses. At one point, BSG performed its own "scrub" of the list of AT&T numbers billed by 800 Vmailbox and Digital Vmail—and found that 5,430 of the 8,413 phone numbers being billed didn't match the name and address provided by the voicemail company. But after the scrub, the FTC says BSG opened no broader investigation into this staggering rate of error. BSG did not proactively offer refunds, and did not notify law enforcement. In fact, it "doubled down on its relationships with the crammers, approving two new Landeen services for billing in the fall of 2010." BSG even agreed to bill for Landeen's services, says the FTC, after Landeen's company admitted that only 20 percent of those billed were even expected to use them.

$422,000 to stream a movie? The continued "success" of phone cramming

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WaylonWillie

Great! Verizon has done this to me again and again; it takes hours to call them and have them remove the charges, and then the do it again next month. I hope they are included….
- http://www.eff.org/ deaduncledave
  
  Funny, Verizon is usually very good about helping their customers opt-out of CSC and other third-party services. Also, I’ve never seen a caller wait more than 20 minutes to be helped by a VZW rep, and that’s *rare*.
  - timmaguire
    
    I had this happen to me years ago and I told Verizon I wanted my account closed to all non-phone charges. They said no. State law (New York) required them to assist scammers in stealing money from their customers (paraphrase, sure, but an accurate paraphrase).
    - http://www.eff.org/ deaduncledave
      
      Wow. That’s mind-boggling. I’d have to check, but I’m pretty sure you were being handed a line of baloney. (Sadly, not everyone who works for %COMPANY will have $COMPANY.POLICY correct.)
- http://www.gyrofrog.com/ Gyrofrog
  
  Is that what this lawsuit is about?
Bevatron Repairman

I had this happen to me on my AT&T landline and not only did they reverse the charges — the service rep told me they’d go back as far as two years if I had needed it. They were quite helpful about it.
realityhater

I code up my companies telecom and data invoices for payment each month HUNDREDS OF PHONE NUMBERS and “let me tell you somesing ” this occurs more than you would like to know . I am on a fist name basis with BSG – and you wouldn’t believe the stories they have for us receiving an invoice – after hearing every scripted answer more than twice I now immeditaly ask for The refund department also and this is very important – REQUEST HOW MANY TIMES THIS HAS BILLED IN THE PAST AND REQUEST A REFUND FOR EACH AND EVERY ONE AS WELL – SOMETIMES YOU MAY NOT CATCH IT FROM WHEN IT ACTUALLY STARTS BILLING. One month my refund was over 400.00 for coupons , voice mail, texting services, Funny how they can invoice you with absolutely no positive ID , but when you are requesting a refund you have to practically give away your first born………….Its about time the feds look into this nonsense – an invoice should be generated through the company that is owed money not your local phone invoice – this 3 rd party billing is bullshit it caused needless red tape and multiple phone calls to different companies in order to correct – but hey somewhere a REPUBLICAN IS GETTING RICH OFF OF IT……..
- elix
  
  I don’t know that you can specifically assign a partisan conspiracy bent to the whole thing, but I think we can all agree that SOMEONE is getting rich off of all of this. There’s a reasonable chance that it’s either a democrat or a republican, since those are the two dominant political parties in the US, yes, but that’s not relevant to fraudulent billing practices in general.
  
  Remember: Just because it’s an election year doesn’t mean that everything has to be political.
  - realityhater
    
    I do not believe this is politically motivated – just having a little fun poking republicans with my stick …………I’ll poke dems as well cause all political parties Suck Eggs – both parties are to blame for the reason the country is in the shape it is in and companies like the ones cramming here are in existence - I hate to say it but federal regulation could-should and would end this nonsense. but hey corruption is in the eye of the beholder…………..Right MCI , Enron , Half of all US banks ,and the list goes on and on and on
    - elix
      
      The BoingBoing 2012 Election Year commenting rules are in play, that’s all. (Scroll down past the basic rules.)
      
      I worked for five years for an outsource company (within North America) for a US mobile carrier. I’ve dealt with these third-party jerks (in a customer service capacity, helping customers being screwed by them) way more than enough.
Guest

Anyone know why the U.S. Attorney isn’t pursuing wire fraud charges in these cases?
- Ryan_T_H
  
  Because if they started pursuing companies for breaking the law, who knows where it could lead?
SomeGuyNamedMark

Steal $300 from a store and go to jail for years. Steal millions via fraud and you get a mansion in South Beach FL.
http://twitter.com/metal_max Max Allan

A classic example of a company who realises they can just do bad shit and get away with it. If you do millions of dollars worth of bad things and they only call you on 50% of it, you’re still well ahead of the game. You hardly need a customer complaint department just auto-refund on any complaint made. You could put a web form out for people to fill in. Just make it that little bit tricky to put a few more people off.

It sounds like they’re basically making random charges and seeing how many of them stick. Anyone who wants it, gets their money back so they are just bending (without breaking) the law.
http://pocketprogressive.org Uncle Geo

Now wait, those companies worked hard to build their business. They are job creators and should be revered not vilified by overzealous regulators. Regulation by evil Liberals and their socialist President will kill the scam business and if scammers like these phone people, or Wall Street bankers or the Koch brothers aren’t allowed to be personally responsible for increasing their own wealth, how will I ever have my shot at being a millionaire like the GOP promises me I’ll be someday?
- IronEdithKidd
  
  All that’s missing here to be the perfect regurgitation of the libitarian republican talking-point play list is a mention of the EPA.
  
  Well played, kind Uncle.
  - SomeGuyNamedMark
    
    Obamacare!
    
    Sorry, you left one out
    - IronEdithKidd
      
      Nope, Geo got that one. It’s inclusive to “Socialist”. ;-P
- SomeGuyNamedMark
  
  It just goes to show that with perseverance, hard work and a complete lack of morals you can become rich in America.
foobar

They should be going after the phone companies for allowing the charges at all. Do they have any non-scam utility at all?
Marc45

I would like to see the Feds create a regulation similar to what the FDA did with food labeling. A single page in “reasonable size print” that states what the deal is in layman’s language for any type of transaction where there’s a contract.

I’ll bet the phone company contract “legalese” says they can bill you on behalf of a 3rd party without any ID or authorization required but it would take too long to read…
- elix
  
  I’ll bet the phone company contract “legalese” says they can bill you on behalf of a 3rd party without any ID or authorization required but it would take too long to read…
  
  Nope. Instead, the phone companies have it in their terms of service that they will bill you for any charges incurred on your service, and that includes third-party services like (third-party-sold) ringtones, voting on American Idol/whatever, subscriptions to text message alerts, and so on. And these scammers just hitch a ride on the same route.
  
  Because the services are (supposedly) opt-in, to your phone carrier, it’s just an add-on that you ostensibly requested. Confirmation is SUPPOSED to be made on the third-party service’s end, so the carrier doesn’t have to make contact with you to confirm that you actually do want to spend 75 cents texting your vote to Who Wants To Marry An X-Factor Idol. The fact that very frequently it was never requested or the user didn’t even realize what they were agreeing to in the impossible-to-actually-find fine print is why it’s a scam.