The Federal Trade Commission is pushing for steps mobile carriers and other companies should take to prevent consumers from being stuck with unauthorized charges on their mobile phone bills, an illegal practice known as mobile cramming.

The report focuses on the multibillion dollar business known as carrier billing, which refers to the placement of charges for goods and services of third-party merchants on a mobile phone bill.

“Mobile Cramming: An FTC Staff Report” includes five recommendations for mobile carriers, merchants who offer goods and services charged directly to mobile phone bills, and billing intermediaries known as aggregators who facilitate the placement of such charges on mobile phone bills.

While the report notes that mobile bills can include legitimate add-on third-party charges such as charitable contributions, others may be crammed onto consumers’ bills by scammers.  

The report notes that while the full scope of mobile cramming is not known, just three cases brought last year by the FTC against mobile crammers led to more than $160 million in judgments. One participant in the FTC’s roundtable on mobile cramming participant called it "almost the perfect scam."

"Mobile cramming is an issue that has affected millions of consumers, sticking them with charges they did not authorize, and the FTC has worked hard to combat it," said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. "The best practices recommended in our report build on the FTC’s active enforcement in this area and would give consumers needed protections to rein in the problems we have seen."

The report follows a number of mobile cramming enforcement actions brought the the FTC in the past year, including against text spammers earlier this month and against T-Mobile a few days earlier.

Last month, the operators of a massive mobile cramming scheme agreed to surrender more than $10 million in assets - including bank accounts, jewelry, real estate in Los Angeles, Beverly Hills and Chicago and several cars - to settle charges. 

Yet another action against mobile cramming took place last December.

Specifically, the report calls for:

Giving consumers the right to block third-party charges. FTC staff calls on mobile phone carriers to give consumers the right to block third-party charges on their mobile bills altogether, and to inform consumers clearly and prominently of that right. Carriers should inform consumers of this right not only when consumers create their account, but also on an ongoing basis.

Ensuring that advertising, marketing, and opt-in processes for charges are not deceptive. Advertising, marketing and opt-in processes for third-party mobile account charges should be clear about how much and how often a consumer will be charged. Mobile carriers should closely monitor the merchants placing charges through their bills to scrutinize whether they are risky or suspicious, and if so, take steps to prevent them from placing charges.

Getting  express, informed consent before charging consumers. Consumers’ express, informed consent must be obtained before placing charges on their mobile phone bill, and reliable records of that consent should be kept. Carriers should closely monitor refund rates, consumer complaints and other signs of possible cramming and take action where necessary.

Clearly displaying third-party charges on bills. Mobile bills should clearly and conspicuously show third-party charges. Carriers should consider steps to make third-party charges more prominent, such as separate billing lines for third-party charges that make it clear to consumers which charges are directly from a carrier and which are from a third party. Also, mobile carriers should give consumers using pre-paid calling plans who do not otherwise receive bills from their mobile carrier to receive specific notification that a third-party charge is being deducted from their account.

Creating an effective process for resolving disputes. Finally, mobile carriers should put in place an effective dispute resolution process that gives clear information to consumers about how to dispute suspicious charges and seek refunds for unauthorized charges. As the report notes, consumers have often complained that carrier refund processes are difficult and inconsistent. The report also calls on carriers, where possible, to give consumers who were crammed refunds of recurring monthly charges including previous months, and when a third-party is stopped from billing because of cramming, to notify consumers whose bills were charged so they can seek refunds for those charges.

Along with these recommendations, the report notes that after the FTC’s 2013 mobile cramming roundtable and FTC and state enforcement actions to combat mobile cramming, there has been a move away from premium SMS billing, which typically relies on text messages ostensibly sent to consumers to initiate charges. In place of premium SMS billing, the report notes a trend toward what is called direct carrier billing, in which charges can be placed on a consumer’s mobile bill through a mobile Web site or app. While major carriers have moved away from premium SMS, the report notes that the recommended consumer protections should apply to direct carrier billing or any other mechanism for placing third-party charges on mobile phone bills.


Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.