[BETA] Fortnightly

THE TELECOMMUNICATIONS INDUSTRY HAS OVERtaken the sweepstakes industry for the dubious title as The Most Complained About Industry.

From January through June of this year, the National Fraud Information Center received 2,071 cramming reports, plus hundreds more calls from consumers with a cramming problem but not enough details for the NFIC to file a formal report. The Federal Trade Commission defines cramming as unexplained charges on a consumer's telephone bill for services never ordered, authorized, received or used.

"Cramming wasn't even among the 1997 top frauds," according to NFIC Director Susan Grant. "[N]ow it's outnumbered the second most-reported scam, slamming, two-to-one." (Slamming occurs when customers have their long-distance provider switched without their authorization or knowledge.)

According to Eileen Harrington, the associate director for marketing practices in the FTC's Bureau of Consumer Protection, "The advent of pay-per-call [technology] marked the beginning of the use of the telephone billing and collection system as a means for consumers to pay for products or services other than telephone transmissions."

While abuses in that area eventually led to the Telephone Disclosure and Dispute Resolution Act of 1992 (15 U.S.C. sec. 5701 et seq., and 47 U.S.C. sec. 228), it remains to be seen whether legislation or industry self-policing will help solve the cramming problem. Both the Federal communications Commission and the Federal Trade Commission appear receptive to a move in Congress to give them more authority to act, but local exchange carriers oppose specific federal regulations or legislation.

The Scope of Fraud

NFIC's Grant, who is also vice president of public policy for the National Consumers League, appeared as the lead witness at the first Capitol Hill hearing on cramming, convened in July by Sen. Susan Collins (R-Maine), chairwoman of the Senate's Permanent Subcommittee on Investigations. In her testimony, Grant recounted some cramming incidents reported to the NFIC:

Caller asks customer to verify address or phone number. Charges then appear on customer's phone bill. The explanation? By verifying, the customer "authorized" the new charges.

Telemarketer invites consumer to join a travel club. Consumer asks for written information, which is never sent, but charges are added to the phone bill.

Consumer fills out sweepstakes entry form, is then billed for club memberships, telecommunications services, etc. (The FTC filed suit in July against Hold Billing Services Ltd., and one of its client, Veterans of America Association, for this practice.)

Cramming, as Sen. Collins stressed at the hearing, is "not a small inconvenience, but a growing consumer fraud."

Statistics back up that statement. Besides the 2,000-plus written reports prepared by the NFIC in the first six months of 1998, Lawrence E. Strickling, deputy chief of the FCC's Common Carrier Bureau, told the subcommittee that the commission receives 300 written complaints and 2,000 inquiries on its hotline per month. At the state level, the Michigan Public Service Commission reportedly receives up to 20 complaints about cramming per day. The Texas Public Utility Commission has received more than 3,100 cramming complaints since Sept. 1, 1997.

Individuals aren't the only victims. The FTC's Harrington, another witness at the investigations subcommittee, noted that businesses,