Sen. Richard Blumenthal (D-Conn.) is looking for tougher rules to keep bogus charges off of consumers’ cellphone bills.
Blumenthal is weighing whether legislation or regulation is best suited to deal with “mobile cramming,” the practice of third-party companies billing consumers for unauthorized charges — for things like ringtones or daily horoscopes — through their cellphone bills.
{mosads}”I’m going to explore whether there’s a need for legislation or whether the [Federal Trade Commission] could be used to apply greater oversight and consumer protection,” he told The Hill.
“I think a lot of it may well be doable through stronger regulatory intervention.”
During a Wednesday hearing on the issue of mobile cramming, Blumenthal repeatedly raised the issue of the wireless companies profiting from the crammed charges.
According to a Senate Commerce Committee report out this week, the four major wireless carriers — AT&T, Verizon, Sprint and T-Mobile — keep between 30 and 40 percent of the crammed charges.
Last fall, those companies agreed to stop billing customers for “premium” SMS text services, which they said constituted a bulk of unauthorized charges, but policymakers have shifted their focus to other kinds of crammed charges.
In its case against T-Mobile, announced earlier this month, the FTC claimed that the company made “hundreds of millions” of dollars by keeping a percentage of the crammed charges.
“These companies make a ton of money” off of the bogus charges, Blumenthal told The Hill. “These incentives are highly perverse.”
During the hearing, Blumenthal noted that the wireless companies are quick to blame the third-party companies and the companies that aggregate those charges.
“All that finger pointing may not be of much benefit to consumers, so the question is, where should the buck stop,” he said, adding that he thinks the responsibility lies with the wireless companies, who profit from the crammed charges.
“What kind of incentives would lead the wireless carriers to take more effective action” to protect their customers, he asked.
Michael Altschul, general counsel at CTIA-The Wireless Association, said the fact that carriers profit from crammed charges “does not influence the carriers decision to first and foremost protect their consumers.”
Altschul also pushed back on a proposal from Blumenthal to have carriers take actions against third party companies that frequently have to issue refunds.
Refund rate “is a very crude metric,” and evaluating the legitimacy of a third-party company on refund rate alone could encourage those companies to issue fewer refunds to deserving customers, he said.
But Blumenthal said wireless companies should do more, including monitoring the companies that are frequently asked to issue refunds.
“They should be exercising greater scrutiny to protect consumers,” he told The Hill.
In his written opening statement, Committee Chairman Jay Rockefeller (D-W.Va.) — who did not attend the hearing due to a scheduling conflict with the Senate Intelligence Committee — also took aim at the wireless companies.
“When we started to ask whether cramming was happening on wireless phone bills, AT&T, Sprint, T-Mobile and Verizon told us they were not repeating the mistakes of the past,” he said, referencing cramming issues on bills for traditional phone lines.
Rockefeller pointed to statements from the industry that wireless companies would protect customers from cramming.
“There is now overwhelming evidence that these statements were just not true — cramming on wireless phones has been widespread and caused consumers substantial harm,” he wrote.