Though wireless carriers have largely phased out the ability for customers to sign up for third-party services via text message, scammers have turned to Web- and app-based options that can result in huge charges on phone bills - and nice paydays for carriers.
A new Senate Commerce Committee report finds that "just as in the landline context, cramming on wireless phone bills has been widespread and has caused consumers substantial harm."
The committee recommended that carriers be more vigilant in identifying new cramming scams, and make it easier for customers to wipe these charges from their bills.
Cramming is when users unknowingly sign up for monthly services that show up on their phone bills - $9.99 per month for horoscopes or celebrity gossip, for example. Most users don't realize they are locking themselves into a monthly charge, and the origin of the excess charges are not clearly spelled out on their wireless bills.
Complaints about cramming date back to at least 2008, when regulators started requiring carriers to refund customers who were duped into signing up for extra services they did not want. Why didn't carriers stop the charges as soon as they heard about them? They took home between 30-40 percent of whatever charges were added to their customers' bills, netting them hundreds of millions of dollars, officials said.
Late last year, AT&T, T-Mobile, and Sprint pledged to stop charging for spam or "premium" texts, though T-Mobile was recently sued over its earlier cramming activity. Verizon also banned these messages, known as commercial Premium Short Messaging Services (PSMS).
Not surprisingly, scammers are just turning to other ways of nabbing your phone number. The report pointed to an online coupon offer that asked users for their email and phone number. But by entering a phone number, they unknowingly signed up for $9.99 monthly horoscope service.
"Today, while the major carriers have phased out commercial PSMS services, they continue to allow third-party charges on consumers' wireless bills using methods that do not involve PSMS," the Senate report said. "These include methods sometimes labeled 'direct carrier billing' (DCB) through which vendors using websites and apps connect to carrier billing platforms. To date, products and services charged through these non-PSMS billing methods have primarily involved digital content, such as music and apps including games with in-app purchasing capabilities."
The carriers told the committee that they are receiving few complaints about direct carrier billing, with refund rates around 1-1.5 percent. But just as scams evolved from land lines to wireless phones, the committee sees a "potential that a growing number of consumers may use this payment option in the future," making it appealing to scammers.
As a result, the committee recommends that carriers: vigilantly monitor evolving third-party billing practices to make sure that bad actors do not find ways to penetrate barriers to cramming on these new systems; and evaluate consumer protection gaps that occurred in the landline and PSMS contexts to establish consistent policies going forward that will provide consumers with appropriate transparency in the third-party billing process and a clear avenue of recourse where unauthorized charges occur.
In response, CTIA - the wireless industry trade association - tweeted that the report "did not suggest a significant problem in this area" at the moment.
"Although CTIA has no direct involvement with direct carrier billing, each national carrier has tough vetting and safeguards against abuse," CTIA said. "The wireless industry is prepared to vigilantly monitor 3rd party billing to stop bad actors, establish consistent policies for consumers [with appropriate] transparency in 3rd party billing process and recourse when unauthorized charges occur."
Earlier this week, the Federal Trade Commission also published a set of recommendations for mobile carriers that it hopes will help cut down on cramming.