In a settlement agreement that highlights the Federal Trade Commission's continuing commitment to protecting consumers from unauthorized charges "crammed" onto their phone bills, two Florida-based companies and their collection agency will pay $210,000 in redress - the total amount they received from consumers who complained about the multi-million-dollar scheme.
Under the terms of the court settlement, Crown Communication Concepts and Investments, Inc. (Crown), Crown Communications Two, Inc. (Crown Two), Global Collections, Inc. (Global), and the principals of these corporations -- Larry Levinson, Bruce Levinson and Jordan Levinson -- will also forgive approximately $36 million in unpaid charges for services billed and will be prohibited from violating the Commission's Pay-Per-Call Rule or making misrepresentations about their audiotext services or telephone-billed transactions in the future.
"Consumers should not have to examine their phone bills with a microscope to ensure that they haven't been overcharged," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "This settlement demonstrates three simple facts: the Commission has no tolerance for cramming; companies are accountable for the accuracy of the charges they bill; and companies are responsible for compensating consumers for any mischarges in a timely way."
According to the Commission's complaint, Crown charged consumers, through their telephone bills, for a variety of collect calls or other long-distance calls that they did not make. However, the charges were actually for "audiotext services," an industry term for audio information and entertainment services - most commonly, as in this case, "adult" entertainment programs offered over the telephone.
Crown allegedly collected consumers' phone numbers using a "Caller ID" type system when they responded to one of the company's advertisements via a toll-free number. According to the Commission, the company then used the "captured" number of the incoming call to insert unauthorized charges on the consumers' phone bills. This was allegedly done even when the company had no way to differentiate between the original caller and the "line subscriber" - the person to whom the telephone number is assigned and who "owns" that number. This is important, because the caller could be someone other than the line subscriber - a family member, a roommate, a visitor, or even a "phone hacker" - who may not be authorized to incur these audiotext charges to the line subscriber's number.
When consumers questioned these long-distance charges, the consumers' local exchange carriers generally removed the disputed charges from the consumers' telephone bills. However, many of these consumers were subsequently contacted by Global, which was Crown's collection company. They were told that they were responsible for paying these audiotext charges, and that if they did not do so, their credit rating would be damaged.
Under the terms of their settlement with the Commission, Crown, Crown Two and Global will pay $210,000 in redress, representing full restitution for those consumers who paid their "crammed" bills in full after receiving a collection letter or call from the companies. In addition, the defendants will forgive all outstanding debts for any telephone-billed transactions related to this matter, estimated at $36 million, and waive any right to collect outstanding phone-billed transactions.
Further, the companies will be prohibited from violating the Commission's Pay-Per-Call Rule or making misrepresentations about their audiotext services or telephone transactions; will be prohibited from billing telephone transactions without getting the consumer's express authorization; and will be required to comply with dispute resolution procedures with respect to audiotext or telephone-billed transactions to ensure that consumers have a meaningful opportunity to challenge future charges they believe are erroneous.
The order also contains a "right to reopen" provision, through which the settlement order can be reopened "for the purpose of requiring repayment of additional redress or other equitable relief" if, upon motion of the Commission, the Court finds that the defendants knowingly made a material misrepresentation or omission concerning the financial information provided to the FTC. Finally, the order contains routine record-keeping, monitoring and compliance provisions.
The Commission vote to accept the proposed settlement of the court action was 5-0. The court approved the settlement, which was filed in the Southern District of Florida, on March 3, 2000.
Copies of the complaint and proposed Stipulated Final Judgment and Order for Permanent Injunction are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
(FTC File No. X990013, Civil Action No. 98-7450)