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Cramming and Scamming: The Beat Goes On...

With spring come new leaves, flowers, and apparently bad guys. On two different listservs of which I'm a member, numerous notes have been racing around about a new and nefarious scam that's making its way to various end users of telecommunications services.

Unfortunately, most of us have at least some experience with cramming, the practice of third parties adding unsolicited charges to phone bills. This practice was quite common after the enactment of the Telecommunications Act of 1996, fell off for a while, and suddenly reared its ugly head again within the last two or three years. Historically, crammers have been very successful largely because of the fact that they know most phone bills are not carefully scrutinized. Crammers also know that many people who go to the trouble of reviewing their bills and who find relatively small irregularities will just nod in disgust and pay the bill rather than question a line item that seems inconsistent with the services that were ordered. Often, when a crammed charge is discovered and brought to the attention of the carrier, the process of securing a credit is as time consuming and painful as a root canal.

However, consumer outrage prompted research and a July 2011 report from the Senate Committee on Commerce, Science and Transportation, chaired by Senator Jay Rockefeller (D, WV). As a result, many of the largest LECs have agreed to slowly disengage from crammers, who in more respectable circles are called "third party billers."

The migration by the big boys (read: Verizon, CenturyLink, AT&T, among others) has been slow because despite consumer dissatisfaction with third party billing, the LECs have made considerable money from these practices, which many believe to be at best quasi-deceptive. In fact, according to The Rockefeller report, since 2006, "AT&T, Qwest (now CenturyTel) and Verizon have earned more than $650 million [themselves] through third party billing."

In any case, AT&T and Verizon have agreed, under duress, to abandon these practices, with AT&T committing to end "most" third party billing by August 2012 on landlines only and Verizon committing to end most third party billing by year end. It's important to note however that Verizon (as opposed to Verizon Wireless) will continue to provide billing services for third party charges that "generally relate to telecommunications or information services that use its network." The definition of the phrase "generally relate to telecommunications or information services" remains to be determined, and its vagueness certainly creates a giant loophole to ensure that cramming practices will not disappear from landline billing entirely, but they should be, at a minimum, reduced. It is to be hoped that third party billing can die, even if it is an excruciatingly slow and painful process.

With the reduction in cramming opportunities comes a new, bolder type of fraud from those who seek to take advantage of overworked telecom staffs. The bad guys have figured, "Why go through a LEC when we can just bill corporate customers directly? Let's make the bills small enough that they won't notice that they have never contracted for service of any kind from us. Let's just see what we can do."

The actual bills sent out by these scammers look real. They appear as normal professionally prepared invoices. The text looks real, and the invoice is dated and contains a reference number, as well as contact information, none of which leads to a real person. Another tipoff to the problem, according to Ken Krupp, a consultant based in Seattle, is the fact that nowhere on the invoice are the words "statement" or "invoice." According to a recent note from Mr. Krupp, "We never pay statements anyway--this being neither, I consider it an offer, not a bill." But with only a cursory look at the bill, it looks real, and that's the rub. As has been the practical side of cramming, for a figure like $425, many overworked telecom managers who approve invoices may find it easier just to approve the invoice than chase down the scammer.

California-based Jonathan Farley, Manager of Telecommunication for CKE Restaurants, Inc.--owner and franchiser of Carl's Jr., Hardee's, Green Burrito and Red Burrito restaurants--indicated that his company, with 1,100 locations, received two invoices from a scammer. Because his department oversees not only services, but equipment and infrastructure for the entire company including franchises, CKE's billing analyst identified the invoice as from a vendor with whom CKE was not familiar. "Because the invoices arrived by mail," Mr. Farley said recently, "I reported the trouble initially to the U.S. Postal Service." The form is easy to complete and can be found here.

End users who believe they may be the target of a scammer located outside their own state should look up the contact information for the local (local to the recipient) office of federal law enforcement--either the FBI or Secret Service. A phone call to either of these agencies can prove very useful in identifying the scammer and/or helping federal law enforcement to either build a case, or make an existing case stronger.

Once the invoice crosses a state line, the matter becomes federal. As long as the origin and destination of the invoice remains in-state, the place to begin the reporting process is most often with the Consumer Affairs Division of the state Attorney General's Office.

In late March, I watched as a scammer who had harmed several of my clients pled guilty to 3 federal crimes in U.S. District Court. Working with my clients, I helped federal law enforcement build its case against the despicable individual who thought he could take advantage of unsophisticated telecommunications consumers. I look forward to being in attendance at his sentencing, and I will be happier still to see him head to federal prison.

My takeaways are that a) vigilance pays and b) it may take a long time, but sometimes the good guys do win!