We can’t figure out why Hollywood hasn’t returned our call, but here's a great idea for an action movie. FTC attorneys go to court to stop a company from illegally billing people for text message-based subscription services they never asked for and didn’t authorize. We even have a can’t-miss title: Crambo.
Maybe our proposed remake is a little light on the headbands and camouflage, but we think it’s a compelling story nonetheless. Cramming — putting unauthorized charges on phone bills — has been around for decades and the FTC has brought dozens of cases challenging the illegal practice. But now that more people are hanging up their landlines in favor of mobile phones, the fraudsters have followed.
According to the FTC's first case challenging mobile cramming, Georgia-based Wise Media sent people periodic texts containing horoscope alerts, “flirting tips,” and similar info. Using the billing mechanisms of mobile phone companies, Wise Media allegedly arranged to have $9.99 monthly charges for the services placed on consumers’ mobile phone bills. The problem? According to the FTC, many consumers never asked for the services and didn’t agree to be billed.
So how do unauthorized charges from other companies show up on people’s cell phone bills in the first place? Obviously, mobile phones can do a lot more than place calls. They’re also a way to order and pay for what are called “premium SMS services.” For example, a customer may buy digital content (say a game) by sending a text (also called an “SMS message”) from their phone and then agreeing to have the charge appear on their bill. To send and receive commercial texts and then place charges on a mobile bill, a content provider (the company selling the game, horoscope, or whatever) uses a five- or six-digit number called a short code. Under standard industry practice, the content provider generally requires the consumer to take two steps to confirm they want to buy something, a practice known as “double opt-in verification." The content provider then enters into an agreement with another business, known as an aggregator, to place charges on specific carriers' mobile bills.
Wise Media used those short codes to enroll people in subscription text services that were delivered three times a week at a cost of $9.99 per month. For many consumers, unwanted texts just started showing up on their cell phones. According to the FTC, that's because the defendants didn’t get consumers’ knowing agreement to pay for the services whether by a "double opt-in" or any other process where a buyer gives express informed consent. Instead, Wise Media placed the charges onto consumers’ mobile bills without their OK, and then raked in the bucks when people paid the bottom-line amount without noticing the unauthorized charges. Shorthand descriptions that didn’t explain what the fees were for made it even tougher for the customer to figure out what was going on.
Even when people responded via text that they didn’t want Wise Media's services, the FTC says they were still billed. What if eagle-eyed consumers tried to dispute the unauthorized charges? According to the FTC, they were in for a customer service obstacle course. The complaint alleges that Wise Media went to great lengths to hide its contact information. When people victimized by the scam finally got through to Wise Media’s call center, they were promised refunds that Wise Media didn’t deliver.
The FTC has charged Wise Media, as well as CEO Brian M. Buckley and owner Winston J. Deloney, with deceptive and unfair practices. The complaint also names Concrete Marketing Research, which allegedly received ill-gotten funds from the operation. The case is pending in federal court in Georgia.
If you have clients in the mobile marketplace, this form of cramming should concern you, too. On May 8, 2013, FTC staff is hosting a roundtable on mobile cramming to discuss the problem with consumer advocates, industry leaders, and others.
In the meantime, we’re still intrigued with the movie idea. <universal hand-to-ear gesture> Have your people call our people, Sly. </universal hand-to-ear gesture>
Let’s just hope there’s not a sequel.