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S. HRG. 112–171 

UNAUTHORIZED CHARGES ON TELEPHONE BILLS: 

WHY CRAMMERS WIN AND CONSUMERS LOSE 

HEARING 

BEFORE THE

COMMITTEE ON COMMERCE, 

SCIENCE, AND TRANSPORTATION 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

JULY 13, 2011 

Printed for the use of the Committee on Commerce, Science, and Transportation 

( 

(II) 

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

JOHN D. ROCKEFELLER IV, West Virginia, Chairman 

DANIEL K. INOUYE, Hawaii 

JOHN F. KERRY, Massachusetts 

BARBARA BOXER, California 

BILL NELSON, Florida 

MARIA CANTWELL, Washington 

FRANK R. LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas 

CLAIRE MCCASKILL, Missouri 

AMY KLOBUCHAR, Minnesota 

TOM UDALL, New Mexico 

MARK WARNER, Virginia 

MARK BEGICH, Alaska 

KAY BAILEY HUTCHISON, Texas, Ranking 

OLYMPIA J. SNOWE, Maine 

JOHN ENSIGN, Nevada 

JIM DEMINT, South Carolina 

JOHN THUNE, South Dakota 

ROGER F. WICKER, Mississippi 

JOHNNY ISAKSON, Georgia 

ROY BLUNT, Missouri 

JOHN BOOZMAN, Arkansas 

PATRICK J. TOOMEY, Pennsylvania 

MARCO RUBIO, Florida 

KELLY AYOTTE, New Hampshire 

DEAN HELLER, Nevada 

ELLEN L. DONESKI, Staff Director 

JAMES REID, Deputy Staff Director 

BRUCE H. ANDREWS, General Counsel 

TODD BERTOSON, Republican Staff Director 

JARROD THOMPSON, Republican Deputy Staff Director 

REBECCA SEIDEL, Republican General Counsel and Chief Investigator 

(III) 

C O N T E N T S 

Page 

Hearing held on July 13, 2011 ............................................................................... 1 

Statement of Senator Rockefeller ........................................................................... 1 

Staff report for Chairman Rockefeller, ‘‘Unauthorized Charges on Telephone Bills’’ ................................................................................................... 3 

Statement of Senator Ayotte ................................................................................... 80 

Statement of Senator Begich .................................................................................. 82 

Statement of Senator Klobuchar ............................................................................ 82 

Statement of Senator McCaskill ............................................................................. 110 

Statement of Senator Udall .................................................................................... 115 

Prepared statement .......................................................................................... 116 

Statement of Senator Boozman .............................................................................. 117 

WITNESSES

Lisa Madigan, Attorney General, Illinois .............................................................. 83 

Prepared statement .......................................................................................... 84 

Elliot Burg, Senior Assistant Attorney General, Office of the Attorney General, State of Vermont ......................................................................................... 89 

Prepared statement .......................................................................................... 90 

Susan Eppley, Decatur, Georgia ............................................................................. 95 

Prepared statement .......................................................................................... 96 

David Spofford, Chief Executive Officer, XIGO, LLC ........................................... 97 

Prepared statement .......................................................................................... 99 

Walter B. McCormick, Jr., President and CEO, United States Telecom Association .................................................................................................................... 100

Prepared statement .......................................................................................... 101 

APPENDIX

Response to written questions submitted to Lisa Madigan by: 

Hon. Amy Klobuchar ........................................................................................ 123 

Hon. Mark Pryor ............................................................................................... 124 

Hon. Kelly Ayotte ............................................................................................. 124 

Response to written questions submitted to Elliot Burg by: 

Hon. Amy Klobuchar ........................................................................................ 126 

Hon. Mark Pryor ............................................................................................... 128 

Hon. Kelly Ayotte ............................................................................................. 129 

Response to written questions submitted to David Spofford by: 

Hon. Amy Klobuchar ........................................................................................ 129 

Hon. Mark Pryor ............................................................................................... 130 

Hon. Kelly Ayotte ............................................................................................. 130 

Response to written questions submitted to Walter B. McCormick, Jr. by: 

Hon. Amy Klobuchar ........................................................................................ 130 

Hon. Mark Pryor ............................................................................................... 132 

Hon. Kelly Ayotte ............................................................................................. 133 

Statement dated July 14, 2011 from Bruce Kushnick, Chairman, Teletruth 

and Executive Director, New Networks Institute ............................................. 133 

Letter dated July 13, 2011 to Hon. John D. Rockefeller IV and Hon. Kay 

Bailey Hutchison from Parul P. Desai, Policy Counsel, Consumers Union .... 136 

Letter dated July 13, 2011 to Hon. John D. Rockefeller IV from Sally Greenberg, Executive Director, National Consumers League .................................... 137 

Letter dated July 12, 2011 to Hon. John D. Rockefeller IV and Hon. Kay 

Bailey Hutchison from Tony Clark, President, National Association of Regulatory Utility Commissioners (NARUC) and John Burke, Chair, Committee 

on Telecommunications ....................................................................................... 139 

(1) 

UNAUTHORIZED CHARGES ON 

TELEPHONE BILLS: WHY CRAMMERS WIN 

AND CONSUMERS LOSE 

WEDNESDAY, JULY 13, 2011 

U.S. SENATE, 

COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, 

Washington, DC. 

The Committee met, pursuant to notice, at 10:10 a.m. in room 

SR–253, Russell Senate Office Building, Hon. John D. Rockefeller 

IV, Chairman of the Committee, presiding. 

OPENING STATEMENT OF HON. JOHN D. ROCKEFELLER IV, 

U.S. SENATOR FROM WEST VIRGINIA 

The CHAIRMAN. Good morning. This hearing will come to order. 

Today’s hearing is about a scam that has cost telephone customers 

billions of dollars. All of you at the witness table are aware of this 

in various ways and it’s called unauthorized charges. The telephone 

company can have authorized charges if you want to buy DISH TV 

or something of that sort, that’s an authorized charge. 

But the great percentage of them are unauthorized charges, but, 

still, the telephone companies still let them appear on the bill. So 

what happens is, they make—they appear on the bill and the person who doesn’t necessarily carefully read the bill, which is often 

four or five pages long, sees this thing, and doesn’t know what it 

is, but they didn’t ask for it. They didn’t want it. It’s not authorized 

to be there. Legally, it shouldn’t be there, but it is there and it’s 

called cramming and it refers to what we call mysterious charges 

that appear on American phone bills for services that people don’t 

want, and don’t use, didn’t ask for, and shouldn’t have to pay for. 

The companies responsible for these cramming charges don’t sell 

legitimate projects, that is, the unauthorized ones. They don’t really sell anything. Most of them don’t seem to do that. Their sole purpose is to place bogus charges on your telephone bill and they’re 

very, very good at that. They’re very good at that and hope that 

you will pay your bill every month without looking at it too closely, 

which unfortunately, a lot of people do. 

In the late 1900s, the Congress and the media devoted a lot of 

attention to this subject of cramming. I remember it well. Committees held hearings on cramming. Anti-cramming bills were introduced in both the House and the Senate. At the time, consumer advocates, and Federal authorities, and the telecommunications industry all agreed that something needed to be done. 

2 

Well, the question was, what needed to be done? The industry 

told a pliant Congress, I guess, that they would fix the problem 

themselves, and that made sense. But they didn’t want to have 

any—they didn’t want—they wanted to have voluntary guidelines, 

yes, but they didn’t want to have any sort of mandates. Or as they 

said, this is—this industry has a powerful self-interest to correct its 

problem and we’re working overtime to rid the industry of this 

scourge, which is kind of a strong statement. And the Congress, 

and the press, I guess everybody, kind of went along with it. Nobody paid much attention to it. 

So Congress took their word for it. We moved onto other important issues because we believed the cramming problem was being 

addressed, which of course, it was not. What we know now is that 

the cramming problem was not solved, far from it. The minute Congress decided to trust that the industry would fix this problem, the 

crammers saw that relaxation and they moved right back in. And 

American families and businesses have been paying the prices ever 

since then. 

So in this committee, we held a year-long investigation on this, 

hundreds of thousands of pages, hundreds of witnesses, consumers, 

businesses, small businesses, all kinds of folks. And we now have 

a very good idea of just how high this price has been. 

Here’s what we’ve learned. More than a decade after telephone 

companies implemented their voluntary guidelines, hundreds of— 

cramming companies—we don’t even know how many—continue to 

place tens of millions of bogus charges on families and businesses 

on their landlines. That’s an important distinction, not on their cell 

phones, but on their landlines. 

And they do that every year. While the individual charges are usually small amounts, between $10 to $30, when you add that up, 

it becomes an enormous amount. It’s billions and billions of dollars. 

Now, there’s also a cost of cramming that’s harder to put a figure 

on and that is the agony that people have to go through, trying to 

figure out, hey, I didn’t order this. If they do look at their bill, how 

do I get rid of it? Oh, I got a call. They call their cramming company, and nobody answers the phone, or maybe somebody does, 

and refers them to the telephone company. And they just get lost, 

and give up, and get mad, and feel even less friendly about their— 

about their Congress. So it’s a problem. 

One of the questions we have asked during this investigation is, 

what have the telephone companies been doing for the past decade 

to protect their customers from these abusive tactics? I was with 

a major telephone CEO last night and we sort of talked about that. 

There wasn’t a great deal said. Anyway, the short answer is not 

enough. Well, all telephone companies have anti-cramming policies. 

They haven’t made a serious effort to keep the crammers off their 

landline phone bills. 

Even when the phone companies kick a company off the bills, the 

crammers come right back in. They wait a week or so and then 

they come right—they flood right back in. There are many 

iterations of their obnoxious behavior. 

Now, one reason, however, the telephone companies don’t really 

crack down on crammers is, they make money from cramming. Oh, 

yes, they make money. Now, do they make a whole lot of money? 

3 

No, but in America, money is money and if you can make money, 

why not? According to the financial information that the Committee staff has reviewed, telephone companies earn a dollar or two 

every single time they place a third-party—an unauthorized thirdparty charge on their customer’s bill. 

So do the math. That’s well over a billion dollars in profit. Today, 

my staff released a report detailing how cramming works and how 

much money it is costing, and not just, you know, American families and businesses, small businesses in particular, people in particular. 

So I ask unanimous consent to enter this report and other related documents into today’s record. Hearing no objection— 

Senator AYOTTE. No, no objection, Mr. Chairman. 

The CHAIRMAN. It will happen, thank you. 

[The information referred to follows:] 

U.S. Senate Committee on Commerce, Science, and Transportation 

Office of Oversight and Investigations—Majority Staff 

Unauthorized Charges on Telephone Bills 

STAFF REPORT FOR CHAIRMAN ROCKEFELLER

JULY 12, 2011 

Table of Contents 

Executive Summary 

I. Background 

A. Development of the Third-Party Billing System on Landline Telephone Bills 

B. Emergence of the Cramming Problem in the 1990s 

C. Prior Efforts to Combat Cramming 

D. Cramming In the 2000s 

E. Cramming On Wireless Telephone Bills 

II. The Committee’s Investigation 

III. Overview of Third-Party Billing On Landline Telephones 

A. The Third-Party Billing Ecosystem 

B. The Cost and Scope of Third-Party Billing 

IV. Cramming Through Third-Party Billing 

A. How Cramming Occurs 

B. Cramming’s Impact on Telephone Customers 

C. Telephone Bill Auditors 

V. Illegitimate Third-Party Vendors 

A. Overview of Approved Third-Party Vendors 

B. Third-Party Vendors Investigated by the Committee 

VI. Role of Telephone Companies in the Cramming Problem 

A. Approval Process for Third-Party Vendors 

B. Anti-Cramming Safeguards 

C. Awareness of the Problem 

D. Response to Customers 

E. Recent Responses to the Cramming Problem 

VII. Conclusion 

Exhibits 

Exhibit 1: Third-Party Billing Graphics 

Exhibit 2: Example: Telephone Bills 

4 

Exhibit 3: Example: Third-Party Vendor Applications 

Appendices 

Appendix A: Cramming Case Studies 

Appendix B: Sample List of Confirmed Victims of Cramming 

Appendix C: Sample List of Third-Party Vendors 

Appendix D: Websites for daData-Related Third-Party Vendors that Offered 

‘‘Electronic Fax Services’’ 

Executive Summary 

In May 2010, Chairman Rockefeller launched an investigation into third-party 

billing on landline telephone bills. He opened the investigation because consumers 

had complained for years that they were finding mysterious charges on their telephone bills for services they had not purchased. To understand the scope and the 

severity of this problem, commonly referred to as ‘‘cramming,’’ the Senate Commerce 

Committee staff has conducted a wide-ranging investigation over the past year. 

The evidence obtained through this investigation suggests that third-party billing 

is causing extensive financial harm to all types of landline telephone customers, 

from residences and small businesses, to government agencies and large companies. 

Over the past decade, telephone customers appear to have been scammed out of billions of dollars through third-party billing on landline telephones. Unauthorized 

third-party charges are a nationwide problem. 

Third-Party Billing and The Rise of Cramming 

Cramming is not a new problem. It began appearing in the 1990s, when telephone 

companies opened their billing platforms to an array of third-party vendors offering 

a variety of services. For the first time, telephone numbers became a payment method equivalent to credit card numbers. Consumers and businesses could purchase 

products or services with their telephone numbers and the charges for the services 

would later appear on their telephone bills. 

While the telephone companies’ decision to open their billing platforms had the 

potential to benefit consumers and businesses, cramming quickly emerged as an unintended consequence. The rise of cramming was so significant in the late 1990s 

that federal authorities, consumer advocates, and telephone companies all agreed 

that changes to the telephone companies’ third-party billing systems were needed. 

At the time, both the Federal Communications Commission (FCC) and the telecommunications industry advocated for a voluntary approach, rather than rulemaking or congressional action. The United States Telephone Association told Congress that the industry ‘‘needed flexibility to deal with cramming on a case specific 

basis’’ and that ‘‘mandatory guidelines or a one-size-fits-all approach would erode 

that ability.’’ Although mandatory requirements for telephone companies were discussed, the problem was addressed almost exclusively through voluntary guidelines. 

The only mandatory requirements placed on telephone companies at the Federal 

level have been the FCC’s ‘‘Truth-in-Billing’’ regulations, which require disclosure 

of third-party charges on telephone bills. 

Over a decade later, thousands of consumers still regularly complain to the Federal Trade Commission (FTC) and the FCC about cramming, while state and Federal authorities continue to bring law enforcement actions against individuals and 

companies for cramming. These cases have shown that consumers continue to be 

scammed out of millions of dollars through cramming. 

The Senate Commerce Committee’s Investigation 

To understand the scope of the cramming problem, the Committee requested information related to third-party billing and cramming from telephone companies; 

state and federal regulatory agencies; companies that offer third-party billing as a 

method of payment; consumers, businesses, and government agencies that have 

been affected by cramming; and companies that specialize in auditing telephone 

bills. 

The evidence obtained and analyzed by Committee staff suggests that third-party 

billing on landline telephones has largely failed to become a reliable method of payment that consumers and businesses use to conduct legitimate commerce. Rather, 

it created cramming, a problem of massive proportions likely affecting millions of 

telephone users and costing them billions of dollars in unauthorized third-party 

charges over the past decade. With the exception of legitimate third-party vendors 

that offer services like satellite television and long distance, third-party billing appears to be primarily used by con artists and unscrupulous companies to scam telephone customers. 

The key findings of the Committee staff’s investigation are the following: 

5 

Third-party billing is a billion dollar industry. Telephone companies place approximately 300 million third-party charges on their customers’ bills each year, 

which amount to more than $2 billion worth of third-party charges on telephone 

bills every year. Over the past 5 years, telephone companies have placed more than 

$10 billion worth of third-party charges on their customers’ landline telephone bills. 

A substantial percentage of third-party charges are unauthorized. While Committee staff cannot determine precisely how many third-party charges are unauthorized, the evidence obtained through the investigation suggests it is a large percentage. 

• Telephone customers with third-party charges on their telephone bills overwhelmingly reported that the charges were unauthorized. Committee staff has 

spoken with more than 500 individuals and business owners whose telephone 

bills included third-party charges. Not one person said the charges were authorized. Law enforcement agencies have reported similar findings when conducting 

surveys for their own cramming investigations. 

• Committee staff is aware of hundreds of third-party vendors whose actions suggest they are engaged in cramming. For example, a company specializing in auditing telephone bills reported that over 800 different third-party vendors had 

placed unauthorized third-party charges on its clients’ landline telephone bills. 

• Committee staff has found hundreds of egregious examples of cramming. Thirdparty vendors have enrolled deceased persons in their so-called ‘‘services’’ and 

charged family members’ telephone bills for it. They have charged telephone 

lines dedicated to fire alarms, security systems, bank vaults, elevators, and 911 

systems. Senior citizens’ telephones have been enrolled in webhosting services, 

even though they have never used the Internet. A children’s hospital was 

charged for a ‘‘celebrity tracker’’ e-mail service that provided ‘‘daily celebrity 

news feeds, photos, and videos.’’ A national bank’s telephone lines were charged 

for ‘‘credit protection plans.’’ Third-party vendors even crammed unauthorized 

charges for voice-mail services onto AT&T’s own telephone lines. 

Telephone companies profit from cramming. Over the past decade, telephone companies have generated over $1 billion dollars in revenue by placing third-party 

charges on their customers’ telephone bills. Since 2006, AT&T, Qwest, and Verizon 

have earned more than $650 million through third-party billing. Verizon explained 

that it ‘‘receives a flat fee between $1 and $2 per charge for placing third-party 

charges’’ on its customers’ bills. Because telephone companies generate revenue by 

placing third-party charges on their customers’ bills, telephone companies profit 

from cramming. Documents reviewed by the Committee staff show that some telephone company employees feel financial pressure to approve third-party vendors 

even though the companies appear to be crammers. 

Cramming affects every segment of the landline telephone customer base. Unauthorized third-party charges harm residences, small businesses, nonprofits, corporations, government agencies, and educational institutions. The Committee has accumulated thousands of examples of cramming on nonresidential telephone bills. 

Examples of cramming on small business telephone lines. A small business that 

owns Popeyes and Krispy Kreme franchises reported that third-party vendors 

placed more than $4,000 worth of charges on its telephone bills for electronic 

facsimile and other services it did not authorize or use. A small business owner 

in Nevada reported that seventeen different third-party vendors charged him 

over $4,000 for online business listings, voice-mail, identity theft protection, and 

streaming video services he did not authorize or use. A bicycle store owner in 

Illinois reported approximately $1,500 of unauthorized charges for ‘‘virtual fax 

and voice-mail’’ services she did not authorize or use. 

Examples of cramming on corporate telephone lines. Large organizations are 

particularly susceptible to cramming because they often have thousands of telephone lines in hundreds of locations. Crammers appear to target them specifically. A national food chain reported over $100,000 worth of unauthorized thirdparty charges on a yearly basis. Other companies provided similar figures. A 

national retail chain reported $550,000 in unauthorized third-party charges on 

its telephone bills over the past decade. The retail chain estimates it has spent 

$400,000 in resources battling unauthorized third-party charges. 

Examples of cramming on government telephone lines. Local, state, and Federal 

agencies also reported cramming on their landline telephone bills. The United 

States Postal Service would have paid almost $550,000 in unauthorized thirdparty charges if it had not hired an auditor to examine its bills. The United 

States Naval Station in San Diego, California, reported its telephone bills inVerDate Nov 24 2008 08:45 Dec 15, 2011 Jkt 071640 PO 00000 Frm 00009 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\71640.TXT SCOM1 PsN: JACKIE
6 

cluded $11,000 worth of unauthorized third-party charges in one quarter in 

2009. Since November 2009, Los Angeles County has received $306,000 in billing credits for unauthorized third-party charges on its AT&T landline telephone 

bills. Los Angeles, Chicago, New York, and other large city governments also 

battled cramming charges. 

Many third-party vendors are illegitimate and created solely to exploit third-party 

billing. Committee staff has found third-party vendors operating out of post office 

boxes, fake offices, and residences, with ‘‘presidents’’ that know nothing about their 

‘‘companies.’’ One woman admitted that she became involved because ‘‘a friend said 

do you want to become president of a company.’’ Another ‘‘president’’ admitted that 

he did nothing more than sign his name to papers that were submitted to telephone 

companies. 

Many telephone customers experiencing cramming did not receive help from their 

telephone companies. Although telephone companies said they instructed their representatives to assist customers with cramming problems, consumers and businesses frequently reported that the telephone companies were not helpful. Company 

representatives frequently stated incorrectly that telephone companies were ‘‘legally 

obligated to place the charges on their bills,’’ and that, ‘‘there was nothing they 

could do to help them.’’ Only after these consumers contacted the Better Business 

Bureau or their state attorneys general did their telephone companies provide assistance for many of them. Business and government offices had similar experiences. 

For example, an AT&T Senior Account Manager for the City of Tyler, Texas, stated, 

‘‘Neither myself or my team can do anything to resolve these for you and this isn’t 

the first time we’ve been asked.’’ He added, ‘‘My former account Dallas County 

would have 20–30 per month . . . I wish, I really wish there was some way we 

could help but there is not.’’ 

The telephone companies are aware that cramming is a major problem on their 

third-party billing systems. While telephone companies regularly tell their regulators and the media that their cramming complaint rates are low, internal documents reviewed by Committee staff show that the companies understand cramming 

is a major customer service problem. The companies have received hundreds of 

thousands of complaints in which consumers used words like ‘‘fraud,’’ ‘‘scam,’’ 

‘‘theft,’’ ‘‘hoodwinked,’’ ‘‘shocked,’’ ‘‘disgusted,’’ ‘‘upset,’’ ‘‘stealing,’’ ‘‘bad business,’’ 

‘‘taking advantage,’’ ‘‘disappointed,’’ and ‘‘unethical’’ to describe their experiences 

with third-party billing. Furthermore, telephone companies deal with only a small 

fraction of the actual number of their dissatisfied, angry customers, because most 

customers either never realize they are being charged or they complain directly to 

third-party vendors. Over an eight month period in 2010, for example, more than 

200,000 people directly called a set of related third-party vendors to cancel their 

services because they ‘‘did not understand,’’ ‘‘did not remember,’’ or ‘‘did not authorize’’ the charges. Over the same period, those third-party vendors received approximately 2,750 cramming complaints forwarded from telephone companies. 

I. Background 

For over a decade, telephone users have complained that their landline telephone 

bills include unauthorized third-party charges. This problem, commonly referred to 

as ‘‘cramming,’’ first appeared in the 1990s, after the telephone companies opened 

their billing platforms to an array of third-party vendors offering a variety of services. In recent years, the Federal Trade Commission (FTC), the Federal Communications Commission (FCC), and state attorneys general have brought multiple enforcement actions against individuals and companies for engaging in cramming. These 

cases showed that telephone users continue to be scammed out of millions of dollars. 

The Commerce Committee opened this investigation to determine how pervasive 

cramming is on the telephone companies’ ‘‘billing and collection’’ systems and to understand why telephone users regularly face these unauthorized third-party charges. 

Over the past year, Committee staff has obtained information from dozens of companies involved in third-party billing and interviewed hundreds of consumers and 

businesses that have been harmed by cramming. This report summarizes the findings of the staff’s investigation. It examines the development of third-party billing 

on landline telephone bills, the process of placing unauthorized charges on phone 

bills, the financial costs of cramming on American consumers and businesses, and 

the role telephone companies play in third-party billing and cramming. 

A. Development of the Third-Party Billing System on Landline Telephone Bills 

The development of third-party billing on landline telephone bills can be traced 

to two regulatory actions in the 1980s: the divestiture of AT&T in 1984, and the 

FCC’s subsequent decision to detariff telephone billing and collection in 1986. Following the break-up of AT&T, ‘‘regional bell operating companies,’’ also referred to 

7 

1This report uses the term ‘‘telephone companies’’ to describe the various types of local exchange carriers that bill their customers for landline telephone service. 2Federal Communications Commission, Detariffing of Billing and Collection Services, Report 

and Order, 102 F.C.C.2d 1150 (Jan. 29, 1986). 3Permanent Subcommittee on Investigations for the Senate Committee on Governmental Affairs, Hearing on ‘‘Cramming:’’ An Emerging Telephone Billing Fraud, 105th Cong. (July 23, 

1998) (S. Hrg. 105–646). 4Section 272(f)(1) Sunset of the BOC Separate Affiliate and Related Requirements; 2000 Biennial Regulatory Review Separate Affiliate Requirements, CC Docket No. 00–175, Report and 

Order and Memorandum Opinion and Order, 22 FCC Rcd. 16440 (2007) (Section 272 Sunset 

Order). 5Federal Trade Commission Report, Fighting Against Fraud: The Case Against Cramming 

(June 1999) (online at http://www.ftc.gov/reports/Fraud/3rd/fightingconsumerfraud.shtm). 

as ‘‘local exchange carriers,’’ 1 provided local telephone services, but were not permitted to offer their own long distance services. Long distance was still supplied by 

AT&T, which no longer had its own billing and collection system due to divestiture. 

Consequently, the local telephone companies provided billing and collection for 

AT&T’s long distance service. To promote competition and fairness, they were also 

required to provide billing and collection services on a nondiscriminatory basis for 

other companies that offered long distance services.2

With the FCC’s decision to detariff billing and collection in 1986, telephone companies gained flexibility over how they used their billing and collection systems. 

Over time, they opened their billing and collection systems to additional third-party 

companies offering a variety of services, some of which were completely unrelated 

to telephone service. This decision led to third-party billing on landline telephone 

bills as it exists today. For the first time, telephone numbers worked much like 

credit card numbers. Consumers could purchase services with their telephone numbers, and the charges for the services would later appear on their telephone bills. 

Although there has been confusion over whether telephone companies must allow 

third-party vendors to place charges on their customers’ telephone bills, the companies’ decision to open their billing platforms to an array of outside vendors was 

largely a business decision rather than a federal regulatory requirement. The FCC 

explained to Congress in 1998: 

[T]he Commission does not require the local exchange companies to provide billing and collection services for any entity requesting such service. The carriers 

have wide latitude to decide for whom they will provide such service, the terms 

under which they will provide service, and the grounds under which they will 

discontinue providing service to customers who refuse to play by the rules.3

Any federal obligation the former Bell operating companies may have had to provide third parties access to their billing systems was extinguished in 2007, when 

the FCC relieved them of the nondiscrimination obligations imposed by Section 272 

of the 1996 Telecommunications Act.4 Presently, with the exception of a few state 

requirements, telephone companies are free to allow, or not allow, whatever companies they choose to place third-party charges on their customers’ telephone bills. 

B. Emergence of the Cramming Problem in the 1990s 

In the 1990s, state and federal authorities, including both the FTC and FCC, saw 

a major spike in consumer complaints about unauthorized third-party charges on 

telephone bills. At the time, experts linked this outbreak of fraud to the telephone 

companies’ inexperience in managing third-party billing payment systems. The FTC 

stated that, ‘‘con artists have found the telephone billing and collection system to 

be a fertile area to defraud consumers’’ because it has ‘‘yet to develop the kind of 

effective mechanisms for risk assessment and fraud prevention that characterize 

other billing and collection systems.’’ 5

Experts also attributed cramming to the ease with which a con artist could obtain 

consumers’ and businesses’ telephone numbers. They noted that the telephone companies’ decision to make their customers’ telephone numbers akin to credit card 

numbers created the ideal conditions for fraudulent conduct. Unlike credit card 

numbers, telephone numbers were widely available to anyone with a telephone directory. The FCC explained: 

[I]t is significantly easier to bill fraudulent charges on telephone bills than on 

credit card bills. While credit card charges require access to a customer account 

number that consumers understand should be treated confidentially, all that is 

often required to get a charge billed on a local telephone bill is the consumer’s 

telephone number. This number is not only expected to be widely distributed, 

8 

6Federal Communications Commission, Truth-in-Billing and Billing Format, CC Docket No. 

98–170, First Report and Order, 14 FCC Rcd. 7492 (May 11, 1999) (italics in original). 7General Accounting Office, Overview of the Cramming Problem (GAO/T–RCED–00–28) (Oct. 

25, 1999). 8 1998 Senate Cramming Hearing, supra, note 3. 9Federal Communications Commission, Anti-Cramming Best Practices Guidelines (available at 

www.fcc.gov/Bureaus/CommonlCarrier/Other/cramming/cramming.html) (accessed July 7, 

2011). 10 Id. 11See 1998 Senate Cramming Hearing, supra, note 3; Subcommittee on Telecommunications, 

Trade, and Consumer Protection for the House Committee on Commerce, Hearing on Protecting 

Consumers Against Cramming and Spamming, 105th Cong. (Sep. 23, 1998). 12 1998 Senate Cramming Hearing, supra, note 3. 13Fair Credit Billing Act, Pub. L. No. 93–495 (1974), 15 U.S.C. § 1601 (1976). 14 Id. 

but can easily be ‘‘captured’’ by an entity even when the consumer has not authorized charges or made a purchase.6

If so inclined, a con artist needed only a few minutes to obtain thousands of consumers’ and businesses’ telephone numbers. In 1999, when analyzing cramming, the 

General Accounting Office (GAO) explained that ‘‘[s]ome vendors apparently have 

simply lifted names and numbers from telephone directories to charge businesses 

for nonexistent services.’’ 7 The rampant levels of fraud and the ease in which it was 

accomplished led the FCC to rank cramming ‘‘as one of the most serious consumer 

problems in the industry.’’ 8

C. Prior Efforts to Combat Cramming 

The rise of unauthorized third-party charges in the 1990s was so significant that 

federal authorities, consumer advocates, and the telephone companies all agreed 

that changes to the telephone companies’ third-party billing systems were needed. 

At the time, both the FCC and the telephone companies advocated correcting the 

problem through voluntary guidelines, rather than through FCC rulemaking or congressional action. 

In April 1998, the FCC invited the largest telephone companies, along with representatives of the relevant telecommunications industry associations, to participate 

in a workshop to develop a set of voluntary guidelines to combat cramming.9 By 

July 1998, the telephone companies and the industry had agreed upon a set of nonbinding guidelines to combat the cramming problem.10 During subsequent congressional hearings about cramming, the telephone industry used the new voluntary 

guidelines to argue that congressional action on cramming and third-party billing 

was not needed.11 At a Senate hearing in July 1998, the President of the United 

States Telephone Association stated: 

The LEC [local exchange carrier] industry should be given the opportunity and 

the needed time to implement the guidelines that have been developed. I have 

a high degree of confidence that these voluntary guidelines will produce an effective means to curb this abuse. This industry has a powerful self-interest to 

correct this problem, and, as I mentioned before, we are working overtime to 

rid the industry of this scourge.12

A number of bills were introduced in Congress that addressed cramming by placing requirements on telephone companies, but none were adopted. 

This voluntary response to the cramming problem marked a different approach 

than the one Congress took when it faced similar problems with the credit card payment system in the 1960s and 1970s. In 1974, Congress passed the Fair Credit Billing Act to protect consumers from the fraudulent conduct that credit cards were enabling.13 The law limited consumers’ liability for unauthorized charges, imposed responsibilities on the credit card companies to ensure that the charges placed on consumers’ bills were authorized, and gave consumers the right to dispute charges on 

their credit card bills.14

Because federal authorities supported a voluntary approach to the cramming 

problem, telephone consumers do not have the legal protections that credit card consumers enjoy through the Fair Credit Billing Act. Consumers who dispute charges 

on their credit card bills have more options and more rights than consumers who 

dispute charges on their telephone bills. 

The only mandatory Federal cramming protections that have been provided to 

consumers are related to telephone bill disclosure. In 1999, the FCC adopted ‘‘Truthin-Billing’’ regulations, which required telephone bills to contain ‘‘full and non-misVerDate Nov 24 2008 08:45 Dec 15, 2011 Jkt 071640 PO 00000 Frm 00012 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\71640.TXT SCOM1 PsN: JACKIE
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15Federal Communications Commission, Truth-in-Billing and Billing Format, CC Docket No. 

98–170, First Report and Order, 14 FCC Rcd. 7492 (May 11, 1999). 16Federal Communications Commission, Cramming Infographic (June 22, 2011). 17Settlement Agreement, State of Florida, Office of the Attorney General v. E-mail Discount 

Network, Fla. 2d Cir. Ct. (No. 2006 CA 2475) (Feb. 15, 2007). 18Stipulated Final Judgment and Order for Permanent Injunction and Consumer Redress as 

to Defendant Willoughby Farr, Federal Trade Commission v. Nationwide Connections, Inc., S.D. 

Fla. (No. 06–80180) (Feb. 19, 2008). 19The Office of the Illinois Attorney General, Madigan Reaches Agreement with U.S. Credit 

Find to Prevent Phone Cramming (June 18, 2009). 20Federal Trade Commission v. Inc21.com Corp., 745 F.Supp.2d 975, 992, 1013 (N.D. Cal. 

2010). 21Federal Communications Commission, FCC To Crammers: No More ‘‘Mystery Fees: $11.7 

Million in Penalties Proposed for Unauthorized Charges on Consumers’ Monthly Phone Bills 

(June 16, 2011). 22Memorandum Opinion and Findings in Support of Preliminary Injunction, Federal Trade 

Commission v. Inc21.com Corporation, et al., N.D. Cal. (No. C10–00022 WHA) (Feb. 19, 2010). 

leading descriptions’’ of third-party products and services and a clear indication of 

the third-party company responsible for each charge.15

D. Cramming in the 2000s 

Although the major telephone companies incorporated many of the voluntary 

guidelines into their third-party billing processes, cramming has continued to be a 

significant problem for landline telephone users up to the present. In June 2011, 

the FCC estimated that 15 to 20 million households are affected by cramming on 

a yearly basis.16 Over the past decade, state and Federal law enforcement agencies 

have brought dozens of enforcement actions against crammers. These law enforcement actions include the following: 

• In 2006, the Attorney General of Florida filed a lawsuit against E-mail Discount 

Network for charging almost 20,000 Florida consumers’ telephone bills for email accounts and coupons they did not request or use.17

• In 2007, the FTC obtained a $34.5 million judgment against Nationwide Connections and two related companies for charging consumers for collect calls that 

were neither made nor received.18

• In 2009, the Attorney General of Illinois filed a lawsuit against U.S. Credit Find 

for placing ‘‘unauthorized charges on more than 9,000 Illinois consumers’ phone 

bills’’ for a purported online tutorial that would ‘‘help consumers fix their credit.’’ 19

• In 2010, a federal district court awarded the FTC a $38 million judgment 

against Inc21.com Corporation and related third-party vendors after learning 

that as few as 0.3 percent of the defendants’ customer base expressly authorized 

the defendants’ charges on their telephone bills.20

• In 2011, the FCC proposed $11.7 million in penalties against Main Street Telephone, VoiceNet Telephone, Cheap2Dial Telephone, and Norristown Telephone 

for charging thousands of telephone users for ‘‘dial-around’’ long distance services they had not ordered.21

The frequency of serious anti-cramming law enforcement actions over the past 

decade suggests that the voluntary guidelines the telephone industry and the FCC 

developed in the late 1990s have not put an end to cramming. The Federal district 

court judge who issued the opinion in the FTC’s recent Inc21 case made the following observation: 

Since its institution, LEC billing has attracted fraudsters . . . In response to 

escalating consumer complaints regarding the placement of unauthorized 

charges on their phone bills—a practice known as ‘‘cramming’’—the FCC responded in the late 1990s by adopting principles and guidelines to help consumers understand their phone bills and to deter this fraudulent practice. Of 

course, the approach taken by the FCC was (and remains today) premised on 

the dubious assumption that consumers scrutinize their phone bills every 

month before paying them, and local phone companies are vigilant about allowing only authorized third-party charges to appear on their bills.22

E. Cramming on Wireless Telephone Bills 

Although the Committee’s investigation has focused on cramming on landline telephone bills, cramming on wireless telephone bills appears to be a problem as well. 

Multiple lawsuits in recent years have shown that unauthorized third-party charges 

are appearing on wireless bills. For example, from 2008 to 2010, the Attorney GenVerDate Nov 24 2008 08:45 Dec 15, 2011 Jkt 071640 PO 00000 Frm 00013 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\71640.TXT SCOM1 PsN: JACKIE
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23State of Florida, Office of the Attorney General, McCollum Reaches Settlement with Sprint 

Over ‘‘Free’’ Ringtones (Oct. 8, 2008). 24State of Texas, Office of the Attorney General, Texas Attorney General Seeks Halt to Fraudulent Text Messaging Scheme (March 10, 2011); Complaint, Cellco Partnership dba Verizon Wireless v. Jason Hope et al., D. Ariz. (No. 2:11–cv–00432–SRB) (Mar. 7, 2011). 25 Beat the New ‘Cramming’ Scams, Consumer Reports (Aug. 2010). 26 BBB: Fight Back Against Phone Bill ‘‘Cramming,’’ Better Business Bureau (Nov. 1, 2010). 27Senate Committee on Commerce, Science, and Transportation, Chairman Rockefeller Announces Investigation into Telephone ‘‘Mystery Charges’’ (Dec. 17, 2010). 28 Id. 29Senate Committee on Commerce, Science, and Transportation, Rockefeller Probe Into Bogus 

Charges on Consumer Phone Bills Expands (Mar. 31, 2011). 

eral of Florida reached settlements with AT&T Mobility, Sprint, T-Mobile, and 

Verizon Wireless related to unauthorized third-party charges on wireless telephone 

bills. The companies agreed to issue refunds to their customers and to adopt various 

disclosure standards for the third-party vendors with which they do business.23 Earlier this year, the Attorney General of Texas and Verizon Wireless filed separate 

lawsuits against a group of defendants accused of running a large-scale text-messaging operation that billed millions of dollars of unauthorized third-party charges 

to consumers’ wireless bills.24

Consumers also have reported cramming on wireless telephone bills to the press 

and consumer groups. Last year, Consumer Reports noted that the ‘‘growing use of 

cell phones as a payment device, for activities such as charitable contributions and 

mobile banking, creates fertile ground for crammers.’’ 25 A Better Business Bureau 

official recently warned, ‘‘You might think that nothing bad can happen from giving 

out your cell phone number, but you should guard your phone number like you 

would a credit card or social security number.’’ 26

II. The Committee’s Investigation 

On June 16, 2010, Chairman Rockefeller opened the Committee’s investigation 

into cramming by sending letters to the then three largest telephone companies that 

offered landline telephone service: AT&T, Qwest, and Verizon.27 The letters requested information and documents related to customer complaints about cramming, the companies’ awareness of the cramming problem, the procedures they put 

in place to combat cramming, and a list of all third-party vendors they have allowed 

to place charges on their customers’ telephone bills. 

In July 2010, Chairman Rockefeller sent letters to the FTC and the FCC to request copies of the complaints each agency had received over the past year that 

were related to unauthorized third-party charges on consumers’ landline telephone 

bills. 

On December 17, 2010, Chairman Rockefeller sent letters to three additional companies: daData, Inc., My Service and Support, and MORE International.28 These 

three companies appeared to be related to a large number of third-party vendors 

that were placing charges on telephone bills, many of which had been the subject 

of repeated consumer complaints about unauthorized charges. The letters asked the 

companies to provide information and documents explaining their relationships with 

the third-party vendors, their role in placing charges on consumers’ telephone bills, 

their methods of acquiring customers, and complaints related to cramming. 

On March 31, 2011, Chairman Rockefeller sent letters to five additional telephone 

companies offering landline telephone service: CenturyLink, Windstream, Frontier 

Communications, FairPoint Communications, and Cincinnati Bell.29 The letters requested information related to the policies and procedures they had in place to combat cramming and the numbers and dollar values of third-party charges billed to 

their customers. 

On May 19, 2011, Chairman Rockefeller sent letters to eight companies that specialize in auditing telephone bills: Advantage IQ, Advocate Networks, Cass Information Systems, ProfitLine, SpectraCorp Technologies Group, Symphony Services, 

Tangoe, and Xigo. During the investigation, Committee staff observed that many 

businesses, nonprofit organizations, municipalities, and government agencies hired 

these companies to dispute unauthorized charges on their behalf. The Committee requested information from these auditors to better understand how cramming impacts large business and government entities. 

In the course of the investigation, Committee staff has reviewed over 3 million 

pages of documents. These documents include third-party vendor applications submitted to the telephone companies, telephone company manuals and procedures for 

handling cramming, correspondence between telephone companies and billing 

aggregators, correspondence between billing aggregators and third-party vendors, 

and telephone companies’ and third-party vendors’ internal e-mails and communicaVerDate Nov 24 2008 08:45 Dec 15, 2011 Jkt 071640 PO 00000 Frm 00014 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\71640.TXT SCOM1 PsN: JACKIE
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30Federal Trade Commission, Telephone ‘‘Crammers’’ Settle FTC Charges: Billing Aggregators 

Debited Phone Bills for Charges Consumers Didn’t Authorize (Aug. 6, 2001). 31 A number of smaller telephone companies do not allow third-party charges on their customers’ bills. For example, the Shenandoah Telephone Company (Shentel) recently wrote Chairman Rockefeller that it eliminated third-party billing in 2007 after receiving cramming comContinued 

tions about cramming. In addition, Committee staff reviewed tens of thousands of 

pages of documents related to cramming complaints from consumers, businesses, 

and government agencies. 

Committee staff also interviewed dozens of individuals with knowledge of cramming. Committee staff spoke with a wide range of telephone users who have been 

victimized by cramming, from employees of large national companies and government agencies, to individual households. Committee staff also interviewed: auditors 

hired by companies and government agencies to remove unauthorized third-party 

charges from their landline telephone bills; ‘‘presidents’’ of third-party vendors; and 

employees both of telephone companies that offer third-party billing and those from 

companies that have chosen not to offer it. Finally, Committee staff spoke to officials 

from both state and Federal agencies, including state attorney general offices and 

state utility commissions, to learn their views on cramming. 

III. Overview of Third-Party Billing on Landline Telephones 

There are two types of third-party billing on landline telephones: (1) third-party 

billing where a vendor, such as a satellite television network or a large long distance provider, contracts directly with a telephone company to place charges on its 

customers’ bills; and (2) third-party billing where the telephone company contracts 

with a ‘‘billing aggregator,’’ or ‘‘clearinghouse,’’ which maintains business relationships with hundreds of other smaller third-party vendors. 

The Committee’s investigation has focused on the latter arrangement because 

most third-party charges come through aggregators, and because consumer cramming complaints reviewed by Committee staff overwhelmingly relate to third-party 

charges placed through aggregators. As will be discussed in the section on ‘‘Illegitimate Third-Party Vendors,’’ many third-party vendors that bill through aggregators 

appear to be created solely to exploit the weaknesses of the landline telephone thirdparty billing system. 

A. The Third-Party Billing Ecosystem 

When the Committee opened the investigation, Committee staff’s understanding 

was that three types of companies play a role in third-party billing: third-party vendors, billing aggregators, and telephone companies. 

Third-Party Vendors: Hundreds of different third-party vendors charge their 

customers for services through telephone bills. These companies claim to offer 

an array of services, including long distance, voice-mail, online backup, online 

photo storage, roadside assistance, and electronic facsimile. To gain access to 

the telephone companies’ third-party billing systems, they enter into contracts 

with billing aggregators. They also register directly with telephone companies 

and receive a carrier identification code (‘‘sub-CIC’’) number. 

Billing Aggregators: The FTC has explained that billing aggregators open ‘‘the 

gate to the telephone billing and collection system’’ and ‘‘act as intermediaries 

between the [third-party] vendors and the local phone companies’’ by ‘‘contracting with the local phone companies . . . to have the local telephone companies collect . . . charges from consumers.’’ 30 Once the charges are collected by 

the phone companies, the billing aggregators, after taking their fee, pass the 

revenues back to their client vendors. A handful of aggregators manage thirdparty vendors’ access to landline telephone bills. Aggregator names that appear 

commonly on phone bills are: ESBI, ILD Teleservices, OAN, Payment One, the 

Billing Resource, Transaction Clearing, and USBI. 

Telephone Companies: Telephone companies control access to their customers’ 

telephone bills and distribute the revenue generated from third-party charges. 

To place charges on telephone bills, a third-party vendor must first acquire a 

sub-CIC number and approval from a telephone company. Once a third-party 

vendor’s charges appear on telephone customers’ bills, the telephone companies, 

after collecting their fees, pass the revenue back to the billing aggregators, 

which then distribute the revenue to the third-party vendors. Committee staff 

has found that many telephone companies—from large national carriers like 

AT&T and Verizon to small independent carriers—place third-party charges on 

their customers’ bills.31

12 

plaints from its customers. Letter from David E. Ferguson, Vice President—Customer Services, 

Shenandoah Telephone Company, to Senator John D. Rockefeller IV (July 5, 2011). The Western 

Telecommunications Alliance told Committee staff that some of its members terminated thirdparty billing ‘‘out of respect for their customers’ dissatisfaction with being’’ crammed and due 

to ‘‘spending an inordinate amount of time and resources trying to get those charges removed 

from their customers’ bills.’’ E-mail message from Western Telecommunications Alliance to Commerce Committee Staff (July 11, 2011). 

Figure I illustrates the third-party charge process as it is usually described by the 

involved parties. The third-party vendor allegedly sells a consumer a service and obtains the consumer’s ‘‘authorization’’ to bill his or her telephone number. The vendor 

passes the number to a billing aggregator, which in turn passes the number on to 

the telephone company that provides the consumer’s landline telephone service. The 

vendor’s charge then begins appearing on the customer’s telephone bill. Once a customer pays his or her bill, the telephone company collects the portion of the payment that covers the third-party charges and, after taking its fees for placing the 

third-party charges, distributes the revenue to the billing aggregator, which then 

distributes to the corresponding third-party vendor. 

As Committee staff conducted the investigation, it became apparent that the actual third-party billing ecosystem is more complicated. Many third-party vendors 

are actually ‘‘front companies’’ for ‘‘hub companies’’ that handle every aspect of the 

vendors’ business. In other words, many third-party vendors do not actually provide 

the services they claim to provide in their applications to the telephone companies. 

Committee staff found dozens of examples of third-party vendors that were in fact 

controlled by hub companies. 


713FIG1.eps 713FIG2.eps
13 

32The Committee requested the number of third-party charges, the dollar value of the thirdparty charges placed on consumers’ telephone bills, and the revenue made by the telephone companies for placing third-party charges on consumers’ telephone bills. In some cases, the companies were unable to provide the information for the complete requested length of time. Although 

the data provided in this report are presented in aggregate, it should be noted that the number 

of third-party charges, dollar value of third-party charges, and revenue derived from third-party 

charges have declined over the past 2 years. 33Letter from Mark J. Montano, Verizon Assistant General Counsel, to Erik Jones, Counsel 

to the Senate Commerce Committee (July 30, 2010). 34 Verizon and Qwest provided the Committee with revenue broken down by billing 

aggregator. AT&T provided a total for third-party billing. As a result, this figure may include 

non-aggregator derived revenue. 

The apparent purpose of hub companies is to game the third-party billing system. 

If a large number of consumers complain to telephone companies or law enforcement 

authorities about a particular third-party vendor, the hub company can simply shift 

additional enrollments to other third-party vendors it controls. When one larger 

company operates through multiple smaller third-party vendors, it is more difficult 

for telephone companies and other authorities to determine how much cramming is 

occurring and who is responsible for it. Part V of this report provides detailed information about hub companies Committee staff examined during this investigation. 

Complicating matters further, Committee staff found evidence that hub companies 

outsource marketing and enrollment to companies called ‘‘lead generators.’’ Lead 

generators are paid to obtain customers’ ‘‘authorizations’’ to bill their telephone 

numbers. They pass the allegedly authorized telephone numbers onto the hub companies, which then pass the numbers to the billing aggregators under the names 

of different front companies. This arrangement invites abuse because lead generators are apparently paid based upon how many consumers they enroll, rather than 

for providing services or maintaining relationships with customers. Their practices 

will be discussed further in the next section of this report. 

B. The Cost and Scope of Third-Party Billing 

To understand the scope of third-party billing, the Committee requested financial 

information about third-party billing from eight providers of landline telephone 

service—AT&T, Verizon, Qwest, CenturyLink, Windstream, FairPoint, Frontier, and 

Cincinnati Bell. Based upon the information the Committee obtained in response to 

these requests, third-party billing on landline telephone bills is a billion-dollar industry. In recent years, approximately 300 million separate third-party charges, 

worth more than $2 billion, have been placed on landline customers’ telephone bills 

each year.32 As will be discussed further below, the information Committee staff has 

reviewed during this investigation suggests that a substantial percentage of these 

charges were unauthorized. 

The information provided by the telephone companies also shows that they earn 

significant revenues by placing third-party charges on their customers’ bills. For example, Verizon explained to the Committee that it ‘‘receives a flat fee between $1 

and $2 per charge for placing third-party charges’’ on its customers’ bills.33 In the 

past decade, telephone companies have generated well over a billion dollars in revenue through third-party billing. Since 2006, AT&T, Qwest, and Verizon, in total, 

have earned more than $650 million through third-party billing.34

IV. Cramming Through Third-Party Billing 

Over the past year, Committee staff has confirmed millions of instances of cramming on thousands of landline telephone bills. Unauthorized third-party charges 

have harmed all types of telephone customers, from residences and small businesses, to large companies and government agencies. Although it is difficult to determine precisely how many third-party charges are unauthorized, the evidence obtained through this investigation overwhelmingly suggests that it is a substantial 

percentage. Because so many third-party charges are unauthorized, the third-party 

billing system that was initially promoted as a ‘‘convenience for telephone customers’’ has instead made them targets for scams. Third-party billing has likely cost 

telephone customers billions of dollars in unauthorized charges and wasted time 

over the past decade. 

Committee staff has reviewed thousands of pages of complaints and letters from 

angry, frustrated landline telephone customers who did not understand why thirdparty vendors were allowed to place unauthorized charges on their telephone bills 

or why their telephone companies refused to resolve the unauthorized charges for 

them. Telephone customers used words like ‘‘fraud,’’ ‘‘scam,’’ ‘‘theft,’’ ‘‘hoodwinked,’’ 

‘‘shocked,’’ ‘‘disgusted,’’ ‘‘upset,’’ ‘‘stealing,’’ ‘‘bad business,’’ ‘‘taking advantage,’’ ‘‘disappointed,’’ and ‘‘unethical’’ to describe their experiences with third-party billing. In 

14 

35 Better Business Bureau, Complaint Activity Report, Case No. 27102339 (June 29, 2009) 

(AT&T Doc. CST009711). 36General Accounting Office, Overview of the Cramming Problem (GAO/T–RCED–00–28) (Oct. 

25, 1999). 37 Consumer complaint to Arkansas Attorney General (Dec. 14, 2009) (AT&T Doc. 

CST029520). 38 Consumer complaint to Kansas Attorney General (Nov. 1, 2009) (AT&T Doc. CST030067). 39 Consumer complaint to Oregon PUC (July 2, 2008) (Qwest Doc. QSC0015024). 40 Consumer complaint to Verizon (Aug. 20, 2009) (Verizon Doc. VZl003l002040). 

a complaint to the Better Business Bureau (BBB), an AT&T customer shared the 

following sentiment, which is also expressed in thousands of other complaints: 

I am concerned for many like myself who really have to decide whether they 

are going to pay their bills or eat for the month. When I have tried [to contact] 

these fly by night companies who are bil[k]ing me with AT&T’s blessing, I get 

the runaround or disconnected. This is very frustrating and it needs to stop. I 

never agreed to have AT&T allow third party billers to charge me for services 

I never ordered and do not want.35

A. How Cramming Occurs 

For cramming to occur, three separate actions are required: (1) a third-party vendor obtains the telephone number of a consumer who has allegedly purchased a 

service, (2) the third-party vendor submits that telephone number to a telephone 

company through a billing aggregator, and (3) the telephone company places the allegedly ‘‘authorized’’ charge for the third-party vendor on the consumer’s telephone 

bill. Because telephone companies do not have their own processes to determine if 

a consumer has ‘‘authorized’’ a charge, once a company engaged in cramming has 

obtained a consumer’s telephone number, it is a simple process to have the charge 

placed on the consumer’s telephone bill. As a result, at its most basic level, cramming is about obtaining telephone numbers. 

Crammers obtain telephone numbers in one of two ways. They either obtain a 

consumer’s telephone number without ever interacting with the consumer; or they 

dupe a consumer, through abusive marketing, into providing his or her telephone 

number and ‘‘authorization.’’ When they are asked to provide proof that a consumer 

has ‘‘authorized’’ a charge, crammers routinely provide information that is inaccurate or insufficient to show that a consumer knowingly purchased the service. 

1. No Consumer Involvement 

In the 1990s, the GAO observed that ‘‘[s]ome vendors apparently have simply lifted names and numbers from telephone directories to charge businesses for nonexistent services.’’ 36 Through its investigation, Committee staff has obtained evidence showing that, over a decade later, third-party vendors continue to engage in 

similar practices. A third-party vendor needs nothing more than information that 

is publicly available, or that can be purchased from ‘‘lead generators,’’ to enroll consumers in its so-called services. Unlike credit cards, which consumers know to protect, telephone numbers are widely available. Once crammers have obtained this information, it is a simple process to submit those numbers to telephone companies. 

Telephone customers frequently submit complaints to telephone companies, consumer advocates, and regulatory offices with proof that they did not provide their 

telephone numbers to the third-party vendors that placed charges on their bills. The 

following examples are representative of thousands of complaints reviewed by Committee staff. 

Deceased Relatives Many telephone customers complained that third-party vendors provided the names of deceased relatives when asked who authorized the 

charges on their telephone bills. A telephone customer stated, ‘‘they informed me my 

deceased son, he died 9 years ago, had signed me up for this service,’’ 37 while another stated, ‘‘they told me it [the service] was ordered by Jean W.—he has been 

deceased for 36 years.’’ 38 Another frustrated customer stated, ‘‘They informed me 

that my husband . . . had ordered the service and I would have to know his security information. When I explained that my husband died 13 years ago, they told 

me that I must have ordered it in his name.’’ 39

Incorrect Personal Information Telephone customers repeatedly complained that 

the information that third-party vendors provided as proof of authorization was incorrect. A Verizon customer complained that ‘‘it was done in our daughter’s name 

but with her actual name reversed, wrong e-mail address, wrong birth date, but 

with our correct home phone number and home address. Neither we nor she ever 

signed up for this service.’’ 40

15 

41 Consumer e-mail to Better Business Bureau of Connecticut (Aug. 21, 2009) (AT&T Doc. 

CST009842). 42 Id. 43 E-mail from Oklahoma Corporation Commission to AT&T employees (Feb. 9, 2010) (AT&T 

Doc. CST0219835). 44 Committee staff telephone interview with United States Navy personnel (May 2, 2011). 45 Consumer complaint to Arkansas Attorney General (Dec. 18, 2009) (AT&T Doc. 

CST029539). 46 Consumer complaint to Oregon PUC (Apr. 24, 2008) (Qwest Doc. QSC0014820). 47Letter to the Office of the Connecticut Attorney General (July 22, 2009) (AT&T Doc. CST 

2622056). 

A Connecticut resident complained that a third-party vendor called 

Billviaphone.com had his address wrong and had informed him that ‘‘Michael . . . 

had signed up online.’’ 41 He explained that, ‘‘[t]here’s no Michael here, just Mark 

& Nancy.’’ 42 In another complaint, a manager from the Oklahoma Corporation Commission contacted AT&T on behalf of an Oklahoma resident. She was ‘‘concerned’’ 

about the proof of enrollment that had been provided because it was not the information for the person who had been charged.43

Unpublished Numbers Numerous businesses and government agencies told Committee staff they have incurred crammed charges on telephone lines that are dedicated to alarm systems, elevators, modems, and other lines that are not assigned 

to any employees. They stated that they do not believe their employees could have 

enrolled those telephone lines in any services because the telephone numbers for the 

lines are unpublished and unknown to employees. For example, a large, multistate 

bank sent Committee staff a spreadsheet showing the following examples of cramming since May 2010: 

• alarm lines incurred charges for directory listings, ‘‘eBusiness Marketing Materials,’’ ‘‘online business,’’ electronic facsimile, long distance plans, and Internet 

radio; 

• an ATM line incurred charges for ‘‘Internet services;’’ 

• remote call forwarding lines incurred charges for ‘‘Instant 411,’’ online coupons, 

directory listings, photo storage, electronic facsimile, monthly ringtones, IT support, Internet TV, and music downloads; 

• a modem line incurred charges for voice-mail; 

• a data line incurred charges for music downloads; 

• emergency call lines incurred charges for electronic facsimile and online diet 

services; 

• equipment monitoring lines incurred charges for voice-mail; 

• a VoIP test line incurred charges for music downloads; and 

• a facsimile line incurred charges for online entertainment news. 

Another bank told Committee staff that it believes that much of the $20,000 

worth of cramming it incurred in the first several months of 2011 occurred on unpublished telephone numbers for modems, alarms, facsimile machines, and other 

telephone lines that are not assigned to individual employees. An office property 

company reported that it has incurred charges on telephone lines for elevators and 

alarms. The U.S. Naval Computer and Telecommunication Station in San Diego 

stated that the crammed charges it has incurred on central office trunk lines must 

be ‘‘100 percent fraud’’ because Naval personnel do not know the telephone numbers 

associated with those lines, the numbers are unpublished, and the numbers do not 

appear on caller identification records because they are not connection points for 

telephone calls.44

Fake Internet Enrollments Telephone customers have repeatedly complained that 

they were told they enrolled for third-party vendors’ services via websites, even 

though they did not have a computer or access to the Internet. An AT&T Arkansas 

customer explained, ‘‘I was told it was ‘triggered’ online. I have no computer . . . 

and have never been online.’’ 45

This type of complaint frequently came from senior citizens or their caregivers. 

A Qwest customer complaining on behalf of her father was told ‘‘that it was an online order of some sort,’’ but she explained that ‘‘her father who lives in an assisted 

living facility . . . does not own, or [know] how to use a computer.’’ 46

In a particularly egregious example, a man complained on behalf of his 82 yearold mother-in-law about a third-party vendor called Talent & More LLC,47 which 

charged her telephone number for a ‘‘web-hosting personal profile’’ allegedly marVerDate Nov 24 2008 08:45 Dec 15, 2011 Jkt 071640 PO 00000 Frm 00019 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\71640.TXT SCOM1 PsN: JACKIE
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48Talent and More LLC, ‘‘About Us’’ Page, (online at www.talentandmore.com/talent/ 

index.php?page=about) (accessed on Jul. 7, 2011). 49Letter to the Office of the Connecticut Attorney General (July 22, 2009) (AT&T Doc. CST 

2622056). 50 Id. 51 Internal Verizon e-mail (June 11, 2009) (Verizon Doc. VZl004l232436). 52 Complaint to the California Public Utilities Commission, CPUC Case Number: 08–05–6106 

(Aug. 27, 2008) (AT&T Doc. CST017883). 53 Better Business Bureau, Complaint Activity Report, Case No. 27123938 (Dec. 4, 2009) 

(AT&T Doc. CST009926). 54Letter to AT&T (Feb. 6, 2010) (AT&T Doc. CST009897). 

keted to ‘‘casting agents’’ for ‘‘booking talent.’’ 48 When he called Talent & More to 

dispute the charges, the company ‘‘insisted that she ordered the web design services 

via the Internet and refused to remove the charges.’’ 49 In a letter to the Connecticut 

Attorney General, the son-in-law explained, ‘‘My Mother-in-Law is 82 years old, does 

not have Internet access, and would not know how to use a website.’’ 50

Even telephone companies realized that Internet enrollment for third-party 

charges on telephone bills was vulnerable to fraud. In June 2009, a Verizon employee who worked in the company’s Cyber Security and Telecommunications Fraud 

group received a cramming complaint from the Michigan State Police. When the 

Verizon employee reviewed the letter of authorization [LOA] that purported to show 

that a Michigan consumer had enrolled in a service called Diamond Debt Solutions, 

he sent an e-mail message to a Verizon employee who worked on third-party billing 

issues. He wrote: 

I received the LOA [letter of authorization]. Thanks. Wow. A person goes online 

and fills that out, and once they put in the phone number that person gets the bills. 

System open for abuse or fraud. If I worked for Diamond Debt Solutions I could sit 

at home tonight and fill out a bunch of these, especially if I had a non-static IP address. Does Verizon get paid by companies line Paymentone, ILD, etc, for us doing 

their billing, or does the govt make us? 51

2. Abusive Marketing 

Small business owners repeatedly complain to their telephone companies, their 

state attorneys general, their state public utilities commissions, and the BBB that 

third-party vendors use abusive marketing, commonly through telemarketing, to 

charge their telephone numbers for services they did not authorize or use. This abusive practice dates back to the 1990s. 

Small business owners reported that telemarketers enroll their businesses by calling their main lines, typically answered by clerks, cashiers, or part-time employees, 

and reading quickly through scripts that are difficult to follow. When small business 

owners challenge the third-party charges, the third-party vendors either cannot provide a recording of the alleged authorization or they provide a recording that shows 

their employees did not understand what was occurring during the call. 

In a complaint to the California Public Utilities Commission, a small business 

owner explained: 

Our company was charged 4 times the amount of $49.95 for a total of $199.80 

for services never ordered. When I called the company they told us that someone named Johnny Thomson had ordered services, a person we never heard of. 

I asked to hear the recording message with the order and Brianna [an employee 

of the third-party vendor] refused to let me do so.52

An anesthesiologist in Indiana discovered two years’ worth of unauthorized thirdparty charges on his AT&T telephone bill and instructed one of his employees to 

call the company placing the charges. The third-party vendor told the employee that 

she had authorized the charge, but she was told ‘‘the recording was unavailable at 

the time.’’ 53 A small business in Tennessee that specializes in landscape design and 

maintenance wrote a letter to AT&T stating, ‘‘[t]hey said (during both phone conversations) that they had a recording of the conversation and they would e-mail it 

to me within 72 hours to confirm their assertion that I agreed to charges. On both 

occasions the company has failed to produce a recording.’’ 54

When recordings were provided to small business owners, they did not demonstrate that the businesses had authorized the services. An insurance agent in 

Missouri explained: 

A telemarketer . . . contacted my business and added 2 separate services I already had or did not want. The first person they talked to was a part-time 17- 

year-old student who did filing only. The other was a 20-year-old apprentice 

17 

55 Better Business Bureau, Complaint Activity Report, Case No. 27108381 (July 31, 2009) 

(AT&T Doc. CST010018). 56 Billing on Petition for Judicial Review, Office of Consumer Advocate v. IA Utilities Board 

and Silv Communications, Iowa D. Ct., Polk County (Case No. CVCV008184) (June 30, 2011). 57Federal Communications Commission, Informal Complaint # 10–C00239929–1 (Aug. 16, 

2010). This complaint was improperly adjudicated as a ‘‘slamming’’ complaint. In the Matter of 

Official Small Business Association, IC No. 10–S2806974 (Jan. 31, 2011). 58Federal Trade Commission Cramming Forum, Examining Phone Bill Cramming, A Discussion (May 11, 2011) (online at http://www.ftc.gov/bcp/workshops/cramming/). 

. . . at no point did they ask for the owner . . . You can tell in the recording 

the young girl was confused.55

Through the investigation, the Committee has obtained voice ‘‘verification’’ recordings of third-party vendors conducting telemarketing. The recordings show telemarketers quickly reading through very long scripts, while employees answer ‘‘yes’’ 

or ‘‘OK’’ to questions they clearly do not understand. Business owners also allege 

that these recordings are sometimes altered to falsely show that the business owner 

authorized the charge. The owner of an Iowa agriculture business complained to the 

Iowa Utilities Board in 2008 that a recording purportedly verifying his purchase of 

a long distance service ‘‘sounds like his voice at the beginning and the end of the 

recording, but not in the middle of the recording, in which the authorization is 

given.’’ 56

Many business owners also complained that on unrecorded portions of the telemarketing calls, crammers falsely promised that the business would receive free 

services. The business manager of a Missouri veterinary clinic complained to the 

FCC and BBB that his office was charged by a vendor called the ‘‘Official Small 

Business Association,’’ after a telemarketer assured him that the only purpose of the 

call was to verify the company’s information ‘‘for an Internet directory listing.’’ The 

manager said he responded affirmatively to the telemarketer’s verification questions 

only because he thought the Internet directory listing was free.57

These accounts are consistent with the experiences of other law enforcement officials. At a recent FTC forum, Illinois Assistant Attorney General Elizabeth 

Blackston described two common fraudulent telemarketing tactics used against 

small businesses: 

[O]ften we see what we construe to be a deceptive and untaped sales pitch followed by the taped verification conversation. And another scenario we’ve seen 

is, in some cases, we don’t even believe that the verification of the telemarketing actually took place. And the reason we think this is because whenever we request information from the company, when someone has complained 

to us . . . in the case of a small business, we’ll be provided with the name of 

someone who never worked for the company.58

B. Cramming’s Impact on Telephone Customers 

Unauthorized third-party charges have harmed all types of telephone customers, 

from residences and small businesses, to government agencies and large companies. 

Every part of the private sector and all levels of government have been harmed by 

cramming. A consistent theme running through the many stories of consumer cramming that have been reviewed during this investigation is that while it appears to 

be very easy for a third-party vendor to place unauthorized charges on consumers’ 

phone bills, it is difficult and time-consuming for consumers’ to remove these 

charges from their bills and receive refunds. 

Committee staff has spoken with hundreds of residential customers and dozens 

of nonresidential customers who have been crammed, and have reviewed thousands 

of complaints that telephone customers submitted to the FTC, FCC, BBB, state attorneys general, and telephone companies. Using this information, Committee staff 

compiled summaries of telephone customers’ experiences with cramming (See Appendix A) and a sample list of businesses, governmental entities, and nonprofit organizations that have been crammed (See Appendix B). 

1. Time and Money 

The unauthorized charges that are crammed onto telephone customer’s bills are 

typically between $10 and $50. These charges, although relatively minor if they 

occur only once, can quickly amount to significant losses for telephone customers. 

To maximize revenue, crammers charge consumers on a recurring monthly basis for 

their ‘‘services,’’ so that the charges will continue as long as consumers fail to discover them. 

18 

59See Appendix A, ‘‘Cramming Case Studies,’’ for summaries of telephone customers’ experiences with third-party billing and cramming. 60 Id. 61 Id. 62 86 separate e-mails from AT&T employees to billing aggregator ESBI regarding cramming 

on 86 AT&T corporate telephone lines (dated Mar. 2, 2009–Nov. 4, 2010) (produced to Committee by daData, Inc., without Bates numbers). 63State of Utah, Division of Public Utilities, Informal Complaint Report, Index No. 3343 (Aug. 

3, 2010) (Qwest Doc. QSC0015631). 64State of California, Public Utilities Commission, CPUC Case No. 08–05–6676 (Aug. 29, 

2008) (AT&T Doc. CST017888). 65Federal Trade Commission, Complaint Database, Reference No. 26258283 (Apr. 27, 2010). 66 Better Business Bureau, Complaint Activity Report, Case No. 27135807 (Mar. 9, 2010) 

(AT&T Doc. CST009999). 

Residences and small businesses affected by cramming have generally experienced 

losses in the hundreds and thousands of dollars.59 Larger organizations, like government agencies and corporations, sometimes experience unauthorized third-party 

charges worth tens of thousands of dollars a year.60 Because large organizations 

often have thousands of telephone lines in hundreds of locations, they are particularly susceptible to cramming. 

For example, the United States Postal Service would have incurred over $500,000 

worth of unauthorized charges if it had not hired a company to audit its telephone 

bills, while a large food chain told Committee staff that it incurs approximately 

$100,000 worth of unauthorized charges on a yearly basis.61 Even AT&T experiences cramming on its telephone lines. Committee staff confirmed that third-party 

vendors associated with one hub company crammed at least 80 of AT&T’s own telephone lines with charges for services such as voice mail, sometimes for periods as 

long as 18 months.62

Battling unauthorized third-party charges also costs telephone customers significant amounts of time, effort, and money. Telephone customers shared the following 

experiences in complaints, which are similar to those of thousands of other customers: 

• A Qwest customer stated, ‘‘this is the 5th time that I have had charges added 

to my bill . . . [e]very time I have spent at least a half hour of my time getting 

these services removed . . . I’m sick of this.’’ 63

• An AT&T customer expressed his frustration after he tried unsuccessfully to 

have third-party charges removed from his bill. He stated, ‘‘[t]his is the 2nd or 

3rd time within about 4 years that something like this has happened to us with 

AT&T . . . where they arbitrarily allow 3rd party companies to start billing for 

some claimed service. THIS IS BUSINESS FRAUD.’’ 64

• A Verizon customer stated, ‘‘I had to call ESBI [a billing aggregator] to tell 

them to remove this from my bill as I never ordered voice-mail from either company. This happens quite often and it appears that Verizon allows them to do 

this. Verizon is also in on this little scam, otherwise, how could it get on the 

bills they send out.’’ 65

As will be discussed further in Part VI, telephone companies frequently failed to 

satisfactorily address their customers’ cramming inquiries. The complaints obtained 

through the investigation showed that telephone customers often needed to enlist 

the help of state regulatory agencies or the BBB in order to receive assistance from 

their telephone companies. Telephone customers also spent countless hours trying 

to stop third-party charges by directly contacting third-party vendors or the billing 

aggregators. 

2. Not a ‘‘Customer Convenience’’ 

In their complaints to the BBB, telephone companies, state public utilities commissions, and state attorneys general, telephone customers repeatedly asked why 

third-party billing was allowed to occur. An AT&T customer from Michigan, after 

experiencing unauthorized charges for an e-mail service, commented, ‘‘This practice 

is weird. It would be like getting an electric bill with my propane bill. It doesn’t 

make any sense.’’ 66

In 2009, AT&T surveyed and interviewed some of its larger nonresidential customers, including educational institutions, government offices, and corporations. 

When AT&T asked the customers to make suggestions for improving AT&T’s billing 

services, many of the customers, without prompting, brought up the issue of cramming. They stated they were angry that AT&T allowed third-party vendors to place 

charges on their bills without authorization. They also expressed frustration that 

19 

67 Response to AT&T Survey (Oct. 1, 2009) (AT&T Doc. CST2389396–98). 68 Response to AT&T Survey (Nov. 2, 2009) (AT&T Doc. CST2389384–86). 69 Response to AT&T Survey (Sep. 25, 2009) (AT&T Doc. CST2389416–18). 70 Response to AT&T Survey (Sep. 1, 2009) (AT&T Doc. CST2389317–19). 71 Response to AT&T Survey (Nov. 25, 2009) (AT&T Doc. CST2389321–23). 72 Response to AT&T Survey (Aug. 13, 2009) (AT&T Doc. CST2389289–91). 73 Response to AT&T Survey (Nov. 3, 2009) (AT&T Doc. CST2373551–53). 74 Response to AT&T Survey (Oct. 16, 2009) (AT&T Doc. CST2389348–50). 75 Response to AT&T Survey (Sep. 1, 2009) (AT&T Doc. CST2389356–58). 76 Response to AT&T Survey (Dec. 10, 2009) (AT&T Doc. CST2389360–62). 77 Response to AT&T Survey (Sep. 24, 2009) (AT&T Doc. CST2389364–66). 78The Committee sent eight firms requests for data related to cramming: Advantage IQ, Inc., 

Advocate Networks, LLC, Cass Information Systems, Inc., ProfitLine, Inc., SpectraCorp Technologies Group, Symphony Services Corp., Tangoe, Inc., and Xigo, LLC. Symphony Services 

Corp. did not provide data because detection of crammed charges ‘‘is not a key focus of its 

telecom services business,’’ and it would have needed to spend ‘‘significant time and expense’’ 

to provide the requested data. 79Due to confidentiality agreements with their clients, the auditors requested that the information they provided to the Committee be presented in a manner that did not specifically identify companies. 

AT&T placed the burden on customers to cancel the charges and obtain billing credits for charges they should not have incurred in the first place. 

Suggestions for stopping third-party billing and other negative statements included the following: 

• University of Texas System: ‘‘My biggest complaint is the unauthorized charges 

‘cramming’ that frequently appear on my bill.’’ 67

• City of Alexandria, LA: ‘‘Do not allow third parties to bill charges to my account.’’ 68

• City of Elmhurst, IL: ‘‘Not allow any third-party billing. Companies access to 

our account. We were ‘crammed’ for six months.’’ 69

• United Van Lines: ‘‘Stop all third party charges. Take ownership of removing 

third party charges when disputed.’’ 70

• Questar Corporation: ‘‘Stop allowing third party charges to be attached to account without prior approval.’’ 71

• Hibbett Sports: ‘‘Don’t allow third party vendors to bill us on your bill. This 

issue makes us very mad and we are considering moving all of our [the rest 

of the sentence is cutoff].’’ 72

• Valero Energy Corp.: ‘‘We have many issues with third party billers for products 

we have not requested. It would be nice if you could block all of our accounts 

from these third party billers.’’ 73

• Children’s Medical Center of Dallas: ‘‘. . . Hate the passing through of bad/ 

fraudulent billing of other companies.’’ 74

• Jackson Park Hospital Foundation: ‘‘Too many 3rd party billing issues after 

blocks were in place!’’ 75

• Doctors Hospital of Springfield: ‘‘You need to offer a blanket vendor freeze on 

accounts. It is too easy for unauthorized people to add stuff to bill.’’ 76

• Crestwood Behavioral Health, Inc.: ‘‘Third party billers should not be allowed.’’ 77

C. Telephone Bill Auditors 

During the investigation, Committee staff learned that companies, government 

agencies, and nonprofits frequently hire firms specializing in telephone bill audits 

to help them discover unauthorized charges on their bills and dispute those charges. 

In response to requests from the Committee, seven auditing companies sent the 

Committee information related to cramming.78 Collectively, these seven auditing 

firms helped more than 800 clients deal with cramming on their landline telephone 

bills during the past 5 years. Their clients were nonprofits, municipal governments, 

Federal Government offices, and businesses from all parts of the private sector, including legal services, financial services, manufacturing, retail, automotive, health 

care, and pharmaceuticals. As the table shows, the auditors identified cramming 

charges on most of their clients’ bills.79

According to information the companies provided to the Committee, almost all of 

the third-party charges they identified on their clients’ bills—more than 300,000— 

were not authorized by their clients. The firms also explained that they disputed 

20 

80 As one auditing firm stated, ‘‘the constant change in names used and line items billed’’ 

makes it difficult to state the precise number of different third-party vendors that have placed 

third-party charges on the auditing firms’ clients’ telephone bills. 

cramming charges placed by hundreds of different third-party vendors.80 One firm 

estimated that 800 different third-party vendors had placed unauthorized charges 

on its clients’ telephone bills during the past 5 years. 

The auditing firms also reported that some of their clients incurred staggering 

amounts of unauthorized charges on their landline telephone bills. One firm reported that a client incurred more than 14,000 unauthorized third-party charges 

over a twelve-month period, and that a pharmaceutical company client incurred 

more than $334,000 in crammed charges during a twelve-month period. Another 

auditor estimated that one of its clients experienced more than 3,700 unauthorized 

third-party charges during a twelve-month period, totaling more than $60,000 in 

charges. A third reported that it identified more than 1,900 instances of unauthorized third-party charges on one individual client’s telephone bills in 2009, and that 

one of its clients would have incurred more than $1 million in crammed charges in 

2009 if the audit company had not been actively monitoring and canceling the 

crammed charges. 

V. Illegitimate Third-Party Vendors 

As part of its investigation into cramming and third-party billing, the Committee 

requested that AT&T, Qwest, and Verizon provide a list of the third-party vendors 

they had allowed to place charges on their customers’ landline telephone bills. The 

Committee took this step because, in recent years, state and Federal authorities 

have brought multiple law enforcement cases showing that illegitimate third-party 

vendors were able to repeatedly cram telephone customers without triggering telephone companies’ monitoring systems. One of the goals of this investigation has 

been to determine how many crammers are currently operating on the telephone 

companies’ landline billing systems. 

A. Overview of Approved Third-Party Vendors 

Using information provided by AT&T, Qwest, and Verizon, Committee staff compiled a list of approximately 1,000 different third-party vendors that are currently 

billing or have recently billed landline telephone bills (See Appendix C for a sample 


713FIG4.eps
21 

81This figure does not mean that only 250 third-party vendors received a ‘D’ or ‘F’ from the 

BBB. Committee staff started reviewing BBB scores to understand the kinds of companies using 

third-party billing. Once staff reached 250 companies with ‘D’ or ‘F’ grades from the BBB, it 

stopped the review. If the review had continued, the number would have been higher. 82These third-party vendors were: My Info Guard, LLC; New Link Network, LLC; NS Voicemail, LLC; Total I Protect, LLC; Total Protection Plus, LLC; USA Voice-mail, Inc.; Vendor Promotions, Inc.; and VoiceXpress, Inc. Letter from Andrew Lustigman, counsel to daData, to Senator John D. Rockefeller IV (Jan. 21, 2011), at 12. 83 Id. at 2. 84 Id. 85 Committee staff obtained a username from BLVD Network, a daData ‘‘client’’ allegedly offering ‘‘electronic fax.’’ Committee staff was able to use the same user name and password to 

log into more than a dozen different electronic fax service websites that were ‘‘clients’’ of 

daData’s. The impact of interrelated third-party vendors is discussed further in Section V. 86Letter from Andrew Lustigman, Counsel to daData, to Senator John D. Rockefeller IV (Feb. 

17, 2011) (hereinafter ‘‘Lustigman Feb. 17, 2011 Letter’’), at 3–6; Letter from Andrew 

Lustigman, counsel to daData, to Senator John D. Rockefeller IV (Jan. 21, 2011) (hereinafter 

‘‘Lustigman Jan. 21 Letter’’), at 3. 

list of third-party vendors). These companies allegedly offer consumers a variety of 

services, including voice mail, webhosting, electronic fax service, online gaming, email, online photo storage, online backup, and roadside assistance. 

The Committee staff’s review of these companies suggests that many of them are 

not engaged in legitimate commerce. Thousands of consumers have complained 

about many of these third-party vendors to state regulatory agencies, the FTC, FCC, 

BBB, telephone companies, and consumer-oriented websites for placing unauthorized third-party charges on their telephone bills. As of November 2010, the BBB had 

given either a ‘D’ or an ‘F’ grade to at least 250 of these companies for unresolved 

complaints related to unauthorized third-party charges on landline telephone bills.81

Many of these third-party vendors appear to be created solely to exploit the weaknesses of third-party billing on landline telephone bills. They do not market their 

services, their websites are barely functional, and they offer services that consumers 

would unlikely purchase knowingly. Committee staff also found that many of these 

seemingly unrelated third-party vendors shared nearly identical websites and had 

the same addresses or contact information. Rather than hundreds of different companies, it appeared that a smaller number of ‘‘hub companies’’ used third-party vendors as ‘‘front companies’’ to conduct their business with the telephone companies. 

B. Third-Party Vendors Investigated by the Committee 

To better understand the relationships between third-party vendors, the Committee requested information from three companies—daData, Inc., My Service and 

Support, and MORE International. Committee staff found that most of the thirdparty vendors related to each of these companies were actually ‘‘front companies’’ 

that have no real corporate structure or assets, and play no role in providing products or services to consumers. Over the past several months, Committee staff has 

called hundreds of these companies’ ‘‘customers,’’ and has yet to locate a single individual who says he or she authorized these companies to charge their phone bills, 

or has used a service these companies purportedly offered. 

1. Interrelated Third-Party Vendors 

The Committee requested information from each company to determine what role 

they played in third-party billing. The evidence obtained by the Committee suggests 

that daData, My Service and Support, and MORE International are each part of 

complex enterprises that are engaged in cramming and designed to conceal their 

true activities and structure from the public and telephone companies. 

daData daData acknowledged to the Committee that it shared common ownership 

with at least eight third-party vendors.82 For approximately 40 other third-party 

vendors, daData first informed the Committee that it provided ‘‘support services 

. . . including marketing, quality control, customer service, billing regulatory, and 

accounting services.’’ 83 daData referred to its clients as ‘‘a diverse group of businesses that offer technically-driven products and services directly to consumers and 

businesses.’’ 84

After further questioning from Committee staff, daData acknowledged that it actually controlled the technology for most of the services that its ‘‘clients’’ allegedly 

offered. For example, approximately 25 of daData’s ‘‘clients’’ offered an electronic 

facsimile service to telephone customers.85 daData first explained that these ‘‘clients 

provide customers with a personal electronic fax number and the ability to send and 

receive faxes on a computer without any specialized equipment.’’ 86 daData later admitted that it controlled the electronic fax service that these third-party vendors ofVerDate Nov 24 2008 08:45 Dec 15, 2011 Jkt 071640 PO 00000 Frm 00025 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\71640.TXT SCOM1 PsN: JACKIE
22 

87 daData Response to Question #1(a) of Dec. 17, 2010 Letter from Chairman Rockefeller to 

Mr. Charles Darst (Mar. 22, 2011) (daData Doc. DAT158629–30). 88Letter from Joel R. Dichter, counsel to MySnS, to Senator John D. Rockefeller IV (Jan. 19, 

2011). 89 Id. 90Id. at 3. These third-party vendors include: Agora Solution; BillWithUs; GreenTreeData; 

LaurenTel; LowCostBiling; MyTeleServices; and MyBillingGuys. 91The Haggler: What Charges Lurk on the Phone Bill, New York Times (Dec. 13, 2009). 92 BillWithUs Corporation, Certificate of Ownership (Dec. 11, 2007). 93 Better Business Bureau, BBB Business Review for MyServiceandSupport, Inc. (online at 

www.bbb.org/minnesota/busines-reviews/internet-service/myserviceandsupport-in-new-hope-mn– 

96083470) (accessed July 11, 2011). 94 Id. 95MyServiceandSuppport Corporation, Certificate of Ownership (June 29, 2010). 96MyTeleservices Corporation, Certificate of Ownership (Apr. 24, 2005); Agora Solution Corporation, Certificate of Ownership (2001); LowCostBilling Corporation (July 3, 2006). 97Letter from Brenda S. Morrison, President of MyBillingGuys, LLC, to the Senate Committee 

on Commerce, Science, and Transportation (July 11, 2011). 98These third party vendors included: Blue Dog Online; Call Direct, Inc.; Connect Direct LD; 

Internet Business Advisors; Long Distance Mart; Sure Connection LD; Universal Call Plan; 

Voice-mail Club, Inc.; Web eCommerce Company; and Xoom Telecommunications, Inc. See Letter 

from Linda Goldstein, counsel for MORE International, to Erik Jones, counsel to the Senate 

Commerce Committee (Feb. 10, 2011), at 2. 99Letter from Linda Goldstein, counsel to MORE International, to Erik Jones, counsel to the 

Senate Commerce Committee (Mar. 24, 2011), at 3. 

fered.87 Committee staff also confirmed that daData was listed as the ‘‘registrant’’ 

for these third-party vendors’ websites. A review of these websites shows that they 

are remarkably similar (See Appendix D, ‘‘Websites for daData-Related Third-Party 

Vendors That Offered ‘Electronic Fax Services’ ’’). 

It appears daData controls every aspect of third-party billing for most of its ‘‘clients,’’ from hiring the lead generators that collect telephone numbers, to providing 

refunds for ‘‘customers’’ who complain about unauthorized charges on their telephone bills. daData and many of its ‘‘clients’’ appear to be a common enterprise. 

My Service and Support (‘‘MySnS’’) MySnS informed the Committee that it is a 

‘‘back office solutions provider that offers web development, product development, 

validation services, regulatory services . . . customer service, call center services 

. . . market research and other business solutions.’’ 88 The company also explained 

that it ‘‘does not market or offer services to consumers nor does it directly bill consumers’’ and that, consequently, ‘‘MySnS does not engage in ‘cramming.’ ’’ 89 MySnS 

only acknowledged a ‘‘business relationship’’ with third-party vendors that ‘‘may 

have billed consumers via the consumers’ telephone numbers.’’ 90

When a New York Times reporter tried to contact a third-party vendor called 

MyTeleServices in 2009 regarding an alleged cramming charge, he was connected 

instead by the billing aggregator ESBI to Paul Monette, a ‘‘spokesman’’ for MySnS. 

Mr. Monette informed the reporter that his company ‘‘handles customer service for 

MyTeleServices and a few dozen other companies.’’91

Despite these statements, Committee staff has obtained evidence showing that 

MySnS and its so-called ‘‘clients,’’ are interrelated. A certificate of ownership obtained by the Committee listed Paul Monette, the vice president of sales and marketing for MySnS, as sole owner of BillWithUs, an alleged ‘‘client’’ of MySnS.92

Other documents showed individuals with the surname, ‘‘Morrison,’’ listed as employees of MySnS, and owners of both MySnS and its alleged ‘‘clients.’’ According 

to the BBB’s website, Geoff Morrison is the CEO of MySnS, while Brenda Morrison 

and Michael Morrison are presidents for the company.93 John Morrison is also listed 

as a contact.94 A certificate of ownership for MySnS obtained by Committee staff 

listed a ‘‘Mildred Morrison’’ as its owner.95 Certificates of ownership for 

MyTeleservices, Agora Solution, and LowCostBilling, alleged ‘‘clients’’ of MySnS’s, 

listed a ‘‘John R. Morrison’’ as the sole owner of the companies,96 while a ‘‘Brenda 

Morrison’’ informed the Committee that she is ‘‘the only owner of MyBillingGuys, 

LLC,’’ another alleged MySnS ‘‘client.’’ 97

MORE International MORE International informed the Committee that, at one 

time, it shared common ownership with EZPhoneBill, a third-party vendor that enrolled consumers in online gaming services. For the additional ten third-party vendors that the Committee linked to MORE, the company explained that it provided 

‘‘customer support’’ and ‘‘management of processing and billing’’ for these companies.98

MORE explained that Gary Jonas and Jeff McKay, the owners of ModernAd 

Media and The Payment People, respectively, ‘‘directed the formation’’ of the thirdparty vendors and ‘‘identified individuals to serve as presidents.’’ 99 Like third-party 

23 

100Lustigman Feb. 17, 2011 Letter, supra note 85, at 9. 101 Id. 102 Committee Staff Telephone Interview (May 19, 2011). 103 Better Business Bureau, BBB Business Review for MyServiceandSupport, Inc. (online at 

www.bbb.org/minnesota/busines-reviews/internet-service/myserviceandsupport-in-new-hope-mn96083470) (accessed July 11, 2011). 104The president of GreenTreeData acknowledged that she did not use any of her own money 

to start the company and that, aside from signing paperwork, she had no involvement with the 

company, except to ‘‘receive a check every month.’’ She was not aware that GreenTreeData had 

received cramming complaints or that telephone companies had suspended it from third-party 

billing for excessive cramming complaints. Committee Staff Interview (Feb. 22, 2011). The president of LaurenTel told Committee staff that, ‘‘I guess I am like the CEO, but I’m not in the 

everyday part of it.’’ She was barely able to describe the services that LaurenTel offered. Committee Staff Interview (Feb. 4, 2011). 105 Complaint for Injunctive and other Equitable Relief, State of Nevada v. The Payment People, Inc., et al., D. Nev. (No. 09–0C00431 1B) (Oct. 2009), at 5, 6–8. 

vendors related to daData and MySnS, these third-party vendors were also one common enterprise. 

2. ‘‘Front Companies’’ 

Committee staff has found ample evidence suggesting that the third-party vendors 

related to daData, MySnS, and MORE International were nothing more than ‘‘front 

companies’’ for larger ‘‘hub companies.’’ Committee staff found third-party vendors 

operating out of mailboxes in UPS Stores, Post Office boxes, fake offices, and residences, with ‘‘presidents’’ that knew nothing about the companies they were supposedly leading. 

daData daData provided the Committee with a list of addresses for 48 different 

third-party vendors. Of these vendors, more than 20 were operating out of mailboxes 

in UPS Stores and United States Post Offices located throughout the country. 

For example, Coast to Coast Voice, LLC, which charged thousands of consumers 

for ‘‘voice-mail services,’’ listed its ‘‘Company Address’’ as: 26 S. Main Street, Suite 

#237, Concord, NH 03301.100 Using Google Maps, Committee staff found that 26. 

S. Main Street is the address of a UPS Store, and ‘‘Suite #237’’ is a mailbox within 

the store. For First Rate Voice Services, LLC, another third-party vendor, daData 

listed its address as: 576 North Birdneck Road, Ste 215, Virginia Beach, VA 

23551.101 This location is a UPS Store and ‘‘Ste 215’’ is a mailbox within the store. 

Committee staff also spoke to multiple ‘‘presidents’’ of the third-party vendors who 

acknowledged that they played no role in the day-to-day operations of the companies. For example, the ‘‘president’’ of WVM Network, LLC, a third-party vendor that 

charged thousands of telephone customers for electronic fax services, admitted that 

he ‘‘only signed his name to documents’’ and knew nothing about the company.102

MySnS MySnS provided the Committee with the addresses of its alleged thirdparty vendor ‘‘clients.’’ Three of the third-party vendors, LowCostBilling, 

MyTeleservices, and Agora Solution, were listed at the same address in Mound, 

Minnesota. Multiple ‘‘address look up’’ websites showed this address as the home 

of John Morrisson, who is also listed as a ‘‘contact’’ for MySnS on the BBB’s 

website.103

Committee staff spoke to the ‘‘presidents’’ of each company. They acknowledged 

that they had no involvement in the day-to-day operations of the companies and 

that MySnS markets the services, enrolls the customers, and handles complaints.104

MORE International According to a lawsuit filed in 2009 by the Nevada Attorney 

General, the Payment People used ‘‘virtual offices’’ run by Regus Management 

Group to create the false impression that the company’s third-party vendors operated independently in various cities across the United States. A front company controlled by the Payment People called ‘‘Universal Call Plan, Inc.,’’ for example, 

claimed to operate out of a Regus virtual office space in Atlanta, Georgia, when it 

actually was operated by Jeff McKay and his associates in Modesto, California.105

Committee staff recently discovered that another one of Mr. McKay’s front companies, the ‘‘Official Small Business Association’’ (OSBA), falsely claims to operate 

from a Regus virtual office space located within several blocks of the United States 

Capitol, at 601 Pennsylvania Avenue, NW in Washington, D.C. When Committee 

staff visited OSBA’s purported corporate headquarters, an office receptionist said 

that the address functioned as a mail drop for Mr. McKay, who actually resides in 

California. 

Committee staff also spoke to the ‘‘president’’ of Xoom Telecommunications, one 

of the interrelated third-party vendors for which MORE International provided ‘‘customer service.’’ The ‘‘president’’ admitted to Committee staff that she knew nothing 

about the day to day operations of the company and that she was president because 

‘‘a friend said ‘I could become president of a company.’ ’’ Her only apparent role was 

24 

106 Committee Staff Telephone Interview (Feb. 9, 2011). 107MySnS Corporate Telephone Invoice (Dec. 11, 2010) (produced to Committee on Apr. 15, 

2011). 108The number of enrolled customers is likely much higher, as MySnS only provided enrollment data for a subset of the third-party vendors that used the 1–800 numbers for voice-mail 

services in December 2010. 109 daData response to Questions 1(b), 1(j), and 1(k) (Apr. 1, 2011) (daData Doc. DAT158722). 110Letter from Margaret Krawiek, Counsel to daData, to Senator John D. Rockefeller IV (Apr. 

1, 2011). 111Letter from Linda Goldstein, Counsel to MORE International, to Erik Jones, Counsel to 

Senate Commerce Committee (Feb. 3, 2011). 

signing forms that were submitted to telephone companies. She receives a monthly 

check worth a few hundred dollars for serving as ‘‘president’’ of the company.106

For GreenTreeData and LaurenTel, the Committee confirmed that the provided 

addresses were actually the homes of the companies’ ‘‘presidents’’ in Georgia and 

Virginia, respectively. 

3. Low Rates of Usage 

Committee staff obtained evidence from multiple third-party vendors showing that 

few, if any, of their ‘‘customers’’ were using the services for which the companies 

were charging them. These findings are consistent with those of other law enforcement inquiries into cramming. Low usage rates are strong evidence that consumers 

did not knowingly purchase the services and were not aware they were being 

charged for them. 

‘‘Voice-mail’’ Services MySnS’s third-party vendors each charged telephone customers for ‘‘voice-mail’’ services that were accessible only by dialing specific 1–800 

telephone numbers. The Committee obtained MySnS’s telephone bill for December 

2010, which showed that approximately 925 unique numbers dialed the 1–800 telephone numbers dedicated to ‘‘voice-mail’’ services during the month.107 At the time, 

at least 97,000 telephone customers were being charged for these services.108 At 

best, less than 1 percent of the telephone customers charged for ‘‘voice-mail’’ services 

used it in December 2010. 

‘‘Online Photo Storage’’ Services daData provided usage data for Coast to Coast 

Photo, Photo Cubbie, Residential Photo, and USA Photo House, which provided ‘‘online photo storage’’ and ‘‘100 prints per month’’ for $14.95 per month. Of the 64,250 

telephone customers that these third-party vendors enrolled in 2009 and 2010,109

less than 2 percent loaded a digital picture to the websites.110

‘‘Casual Online Gaming’’ Services With assistance from MORE International’s 

counsel, a counsel for the Committee enrolled in the ‘‘casual online gaming services’’ 

offered by EZPhoneBill, a third-party vendor associated with MORE, to determine 

whether enrolled telephone customers were using the company’s services. Committee staff had noticed that few, if any, ‘‘customers’’ appeared to be using its online 

gaming website, games.ezphonebill.com. Before Committee counsel accessed the 

website, the front page listed ‘‘No scores logged yet!’’ for its ‘‘All Time Top Scores,’’ 

even though it had enrolled more than 20,000 telephone customers in the service 

and generated almost $1 million dollars by charging those customers $14.95 per 

month.111

After Committee counsel logged in to the website and tested two games, his personal e-mail address was immediately listed under the ‘‘All Time Top Scores’’ on the 

main page. He was listed with the ‘‘All Time Top Scores,’’ even though he merely 

opened two games, clicked a few buttons, and exited. Upon further investigation, 

Committee staff learned that the exact same games could be accessed for free at 

another website, www.skillpod.com. The games available on this website were not 

just similar to those on EZPhoneBill’s website. They were the exact same games 

with the same graphics. It appears EZPhoneBill has charged thousands of telephone 


713FIG3.eps
25 

112MORE International informed the Committee that a company called TTC Marketing handled ‘‘customer service calls’’ and that it provided ‘‘weekly disposition reports detailing, among 

other things, the number of consumers that inquire about the charges on their phone bill, wish 

to cancel their service, and seek a refund.’’ Letter from Linda Goldstein, Counsel to MORE 

International, to Erik Jones, Counsel to the Senate Commerce Committee (Mar. 24, 2011). 113TTC Marketing Solutions, DigiProd LLC Key Code Report ‘‘For Calling Through 12/31/ 

2010’’ (MORE Doc. MORE INTL 2061–2093). 114Id. 115 daData Produced Document (daData Doc. DAT366822). 116Lustigman Feb. 17, 2011 Letter, supra note 85, at 4. 

customers for ‘‘casual online gaming services’’ they are not using and that can be 

accessed for free on another website. 

4. Cancellation Calls from ‘‘Customers’’ 

The Committee obtained data summarizing the nature of the calls that telephone 

customers made to the ‘‘customer service centers’’ for the third-party vendors related 

to daData and MORE International. This data also suggested that the companies’ 

‘‘customers’’ never authorized charges for the companies’ alleged services. For the 

MORE International-related companies, the data showed that most of the calls to 

the companies’ ‘‘customer service center’’ were related to canceling the services or 

issuing credits.112 In 2010, the ‘‘customer service center’’ apparently handled 19,227 

calls for MORE International-related companies.113 During the year, only nine calls 

were categorized as ‘‘Tech Support,’’ while 8,986 were categorized as ‘‘Issue Credit’’ 

and 4,262 were categorized as ‘‘Cancellation.’’ 114 Call data for daData-related thirdparty vendors also suggested the companies’ ‘‘customers’’ had not authorized charges 

to their telephone bills. During an 8-month period in 2010, of the 235,745 ‘‘customers’’ who called to cancel the services, 201,583 of the cancellation calls were categorized by customer service representatives as either ‘‘Business Number,’’ ‘‘Did Not 

Authorize,’’ ‘‘Did Not Understand,’’ ‘‘Does Not Remember,’’ ‘‘Un-Auth Employee,’’ or 

‘‘Unauth Household Member.’’ 115

5. Committee Staff Calls to the Third-Party Vendors’ ‘‘Customers’’ 

The Committee obtained the contact information for thousands of the telephone 

customers who had been charged by third-party vendors that were related to 

daData, MySnS, and MORE International. At random, Committee staff called consumers who had allegedly purchased services from the following third-party vendors: BLVD Network, Total Protection Plus, MyInfoGuard, Coast to Coast Voice, 

Nationwide Assist Fax, TriVoice International, Agora Solution, MyBillingServices, 

Xoom Telecommunications, and EZPhoneBill. 

Committee staff called approximately 1,700 randomly selected ‘‘customers,’’ and 

spoke to over 500 of them about their experiences. Not a single individual or business owner reported that they had authorized the third-party vendors’ charges on 

their telephone bills. Telephone customers either reported that they had already 

found the unauthorized charges and had them removed, or they were surprised to 

learn that their telephone bills included third-party charges. 

Staff calls to ‘‘customers’’ of Total Protection Plus, for example, resulted in clear 

evidence of cramming. This daData-controlled vendor allegedly ‘‘offers customers 

electronic fax capabilities with online data back-up voice messaging with ID theft 

protection, and stand-alone voice-mail access.’’ 116 daData informed the Committee 

that the Total Protection Plus ‘‘service’’ was marketed to individuals. The company 

provided the Committee the names, telephone numbers, and other information 

about customers who had allegedly purchased the service. 

Although these documents identified the telephone numbers that were enrolled in 

Total Protection Plus as ‘‘Home Phone’’ numbers, Committee staff called dozens of 

the numbers and discovered that they belonged to government agencies and businesses. For example, some of the numbers belonged to a Taco Bell, a Wal-Mart, a 

Publix grocery store, the Broward County Sheriff’s Office, an emergency room, a 

Capital One bank, the Jacksonville Aviation Authority, a juvenile detention center, 

Prince George’s County Community Center, and the West Virginia Department of 

Highways. Documents daData produced to the Committee show numerous instances 

in which business and government offices complained that their telephone numbers 

had been enrolled in Total Protection Plus. 

6. Enrollments and Financials 

The third-party vendors related to daData, MySnS, and MORE International have 

enrolled millions of telephone customers in their ‘‘services’’ and have generated millions of dollars through recurring monthly charges. Over the past two years, 

26 

117 daData response to Questions 1(b), 1(j), and 1(k) (Apr. 1, 2011) (daData Doc. DAT158722). 118 Id. 119Letter from Joel Dichter, Counsel to MySnS, to Senator John D. Rockefeller IV (Jan. 19, 

2011). 120Letters from Linda Goldstein, Counsel to MORE International, to Erik Jones, Counsel to 

Senate Commerce Committee (Feb. 3, 2011 and Feb. 10, 2011). 121Letter from Timothy P. McKone, AT&T Executive Vice President for Federal Relations, to 

Senator John D. Rockefeller IV (Mar. 4, 2011). 122 AT&T’s contracts with billing aggregators have stated, ‘‘AT&T may, at its sole discretion, 

reject any products or services or charges for billing,’’ and that, ‘‘prior to submitting billing data 

to AT&T, Customer must complete a product or services approval process, which shall be determined by AT&T at its sole discretion.’’ Older versions stated it ‘‘reserves the right to reject for 

any or no reason, in its reasonable discretion, the addition of any new Clients.’’ Qwest’s contracts stated, ‘‘Qwest retains sole discretion on matters relating to which Billing Aggregator’s 

Clients may bill within the Qwest shared bill.’’ 123 Anti-Cramming Best Practices Guidelines (1998) (online at http://transition.fcc.gov/Bureaus/CommonlCarrier/Other/cramming/cramming.html). 

daData-related third-party vendors enrolled over 800,000 telephone customers and 

generated more than $50 million in revenue.117 As of April 2011, approximately 

350,000 telephone customers were being charged by daData-related vendors on a 

monthly basis.118 Between 2007 and 2010, MySnS-related vendors enrolled 1,201,460 telephone customers and generated $13 million in revenue.119 Between 

2008 and 2010, MORE-related vendors enrolled 316,016 telephone customers and 

generated over approximately $26 million in revenue.120

The third-party vendors related to these three companies have generated almost $90 million dollars in revenue over the past few years by placing third-party charges 

on telephone customers’ bills. Most of these charges are likely unauthorized. 

VI. Role of Telephone Companies in the Cramming Problem 

Telephone companies play an essential role in third-party billing. They act as the 

gatekeepers to their billing and collection systems, and they distribute the revenue 

that third-party vendors generate by placing charges on their customers’ telephone 

bills. As discussed in earlier sections of this report, the telephone companies also 

benefit financially from third-party billing. Because they play this critical role, telephone companies are well aware that third-party billing is harming their customers. 

In recent years, telephone companies have made efforts to address the cramming 

that has been occurring on their customers’ bills. They have conducted internal investigations and audits to determine the weaknesses of their third-party billing systems and they have modified their contracts with billing aggregators to address 

cramming concerns. AT&T has discontinued allowing certain types of services that 

were causing cramming complaints, including voice-mail services, e-mail services, 

‘‘Web hosting,’’ and ‘‘Internet-based directory assistance.’’ 121 While these steps appear to have successfully decreased unauthorized charges on landline telephone 

bills, they have not eradicated the problem. As discussed in Part V of this report, 

Committee staff has found numerous examples of third-party vendors that are likely 

engaging in cramming and are currently placing charges on telephone customers’ 

bills. 

A. Approval Process for Third-Party Vendors 

Telephone companies do not contract directly with most third-party vendors. They 

contract with billing aggregators, which serve as clearinghouses for hundreds of 

smaller third-party vendors. While they rely on billing aggregators to monitor the 

business practices of third-party vendors, they retain the final authority to determine whether a third-party vendor should have access to their billing platforms. In 

order to place charges on telephone customers’ bills, third-party vendors must first 

be approved by the telephone companies.122 As discussed above, telephone companies have no legal obligation to let third-party vendors use their billing platforms. 

The 1998 Anti-Cramming Best Practices Guidelines suggested that the telephone 

companies have a screening process in place for new companies wishing to place 

charges on their customers’ telephone bills. The guidelines recommended that: 

For the purposes of identifying programs that may be deceptive or misleading 

or otherwise not in compliance with applicable LEC [local exchange carrier] 

policies, the LEC should consider requiring a comprehensive product screening 

and text phrase review/approval process.123

To comply with these guidelines, telephone companies have adopted screening 

procedures for third-party vendors. They require each third-party vendor to submit 

basic corporate information, including the vendor’s address and telephone number, 

a description of the services it will provide telephone customers, the names of the 

27 

124See Exhibit 3, ‘‘Example Third-Party Vendor Applications.’’ 125 Id. 126Letter from Mark J. Montano, Verizon Assistant General Counsel to Erik Jones, Counsel 

to the Senate Commerce Committee (July 30, 2010). 127Letter from Barbara Van Gelder, Counsel to Qwest, to Senator John D. Rockefeller IV 

(July 16, 2010). 128See Internal Verizon e-mail (Nov. 26, 2008) (Verizon Doc. VZl004l229588). 129 Internal AT&T e-mail chain (July 20, 2006) (AT&T Doc. CST 2316558–62). 130 Id. 131 Id. 132 Id. 

company’s officers, and its state of incorporation.124 Third-party vendors must also 

submit websites, marketing materials, and any telemarketing scripts they may use 

to enroll customers. AT&T’s application also specifically requests that third-party 

vendors disclose any affiliations with other companies that are billing consumers’ 

telephone bills.125

As part of the application process, AT&T, Qwest, and Verizon each conduct reviews of third-party vendors. For example, Verizon explained that it, ‘‘performs its 

own review of potential sub-CICs [third-party vendors] prior to permitting them to 

include charges’’ and that it ‘‘will perform an Internet search of the identified principles . . . to determine if the sub-CIC is affiliated with any sub-CICs with which 

Verizon has experienced cramming-related issues.’’ 126 Qwest explained that, ‘‘at its 

discretion, [it] conducts its own, independent investigation regarding the vendor and 

its program,’’ and that ‘‘after a thorough review . . . Qwest decides whether to allow 

the billing aggregator to bill for the vendor’s program.’’ 127

Financial Pressure to Approve Vendors While this approval and review process 

has deterred bad actors in some instances, Committee staff has also accumulated 

many examples showing when it did not. Documents obtained during the investigation showed that billing aggregators routinely submitted applications for questionable third-party vendors to the telephone companies, and that telephone companies 

often approved these applications, even though there was evidence that the applicants were crammers. 

Evidence reviewed by Committee staff shows that telephone company employees 

understood that third-party billing was a valuable source of revenue for their companies. While allowing third-party vendors to access their telephone bills exposed 

their customers to cramming, it was also profitable business line for the companies. 

In November 2008, for example, a Verizon employee forwarded a cramming complaint to a colleague and stated, ‘‘[h]ere is an example where B&C [billings & collections] is causing problems here—why do we let this ESBI—and there have been 

many complaints on this provider, do business with us?’’ He asked, ‘‘[w]hy can’t we 

just shut this off and let these carriers go elsewhere—i.e., use a credit card for their 

services and get out of this business?’’ As the colleague forwarded the e-mail to the 

Verizon employee who handled complaints he noted, ‘‘I did not respond . . . since 

. . . I’m confident he already understands that B&C is a revenue generating product with excellent margins (ROI) [return on investment] for Verizon.’’ 128

In July 2006, AT&T employees reviewed a third-party application that Integretel, 

a billing aggregator, submitted on behalf of a company called NetOpus. During the 

review process, the company’s application raised red flags for an AT&T employee, 

who noted that, ‘‘from a Product perspective, it appears as if this request should be 

denied.’’ 129 Despite this recommendation, other AT&T employees considered requiring a ‘‘letter of credit to cover any potential financial issues’’ to satisfy concerns 

raised about the company.130 In response, an AT&T employee stated the following: 

Not sure how you can put a dollar amount on something like this??? In case 

of end-user class action lawsuits, it could be in the millions . . . With or without a letter of credit, I don’t have a warm fuzzy . . . Tracy tells me all the time, 

‘‘your contract says you can deny a subCIC whenever you want, even if the reason is simply that you don’t like it.’’ Problem is we have KK [AT&T employee] 

and PW [AT&T employee] standing in the way of that prerogative. When it’s 

KK and PW taking the message back to the customer, even a denial is never 

a denial.131

A Director for AT&T Billing & Collection replied, ‘‘I know however we are pushed 

to bring in revenue and we can’t if we deny new customers. The only thing we can 

do is try to get as much protection as possible and go from there.’’ 132 Frustrated 

with this response, the AT&T employee stated: 

Hmmm . . . regardless of the level of risk, sounds like we are never denying 

anything ever again. . . . 

28 

133 Id. 134Federal Trade Commission v. Inc21.com Corp., 745 F.Supp.2d 975, 1004 (N.D. Cal. 2010). 135 AT&T was not the only telephone company that allowed NetOpus and other related thirdparty vendors to place charges on telephone customers’ bills. 136Federal Trade Commission v. Inc21.com Corp., 745 F.Supp.2d 975, 982 (N.D. Cal. 2010). 137 E-mail to the Virginia State Corporation Commission (Oct. 30, 2009) (Verizon Doc. 

VZl009l116214–15). 138 E-mail message from AT&T Business Solutions Customer Service Manager to City of Chicago employee (June 10, 2010). 

So in other words, because of the unrealistic revenue goals and the push from 

‘‘sales’’ to meet those goals, regardless of protecting the integrity of the bill, and 

regardless of what the contract says, and regardless of what Tracy has said to 

me on numerous occasions . . . the only thing we REALLY have the power to 

do is push back enough and hope the subCIC realizes it is futile and goes away 

on their own.133

Documents show that AT&T eventually approved NetOpus to place charges on its 

customers’ bills. A few years later, the AT&T employee’s concerns about NetOpus 

proved to be correct. In 2010, the FTC won a $38 million judgment against Roy and 

John Lin, the owners of NetOpus and other interrelated third-party vendors, for engaging in cramming.134 AT&T apparently allowed NetOpus to place charges on its 

customers’ bills until 2010.135 In making its ruling against the Lins, the Federal district court called third-party billing a ‘‘fraud-friendly practice’’ and noted that 

NetOpus was ‘‘exactly the same’’ as other products the Lin brothers sold.136

B. Anti-Cramming Safeguards 

In responses they provided to the Committee, the telephone companies explained 

that they have practices in place to protect their customers against cramming. They 

monitor the number of complaints they receive about specific third-party vendors 

and offer ‘‘bill blocking’’ for customers who do not want third-party charges on their 

telephone bills. Telephone companies also reported that they removed third-party 

vendors from their billing platforms when the companies exceeded certain complaint 

thresholds. AT&T reported that it stopped approving third-party vendor applications 

for certain types of services because of high levels of cramming complaints. 

While these safeguards protected some telephone customers from cramming, Committee staff found evidence showing that: (1) the procedures do not work properly; 

and (2) that even when the procedures do work properly, they do not eliminate 

cramming. Even if they are effectively employed, blocking and other ‘‘back end’’ responses to cramming do not prevent fraudulent billers from gaining access to the 

companies’ billing systems and harming consumers. 

1. Bill Blocking 

All eight telephone companies that provided information to the Committee reported that they offer ‘‘bill blocking’’ free of charge to customers who request it. In 

theory, a customer who requests ‘‘bill blocking’’ will stop third-party charges from 

appearing on telephone bills. In practice, ‘‘bill blocking’’ often fails to function properly. Documents obtained by the Committee showed that customers who had previously requested ‘‘bill blocking’’ often complained that unauthorized third-party 

charges continued to appear on their telephone bills. 

• An employee for a Virginia shipping company explained to the Virginia State 

Corporation Commission that, ‘‘I have placed cramming blocks on all numbers 

that I can; cramming blocks have failed.’’ 137 This employee had repeatedly 

sought assistance from Verizon to stop unauthorized charges from appearing on 

her employers’ telephone bills, yet the problem continued. 

• The City of Chicago told Committee staff that it incurs cramming on its 

landline telephone bills despite its requests for AT&T to block all third-party 

charges. An AT&T customer service manager e-mailed the city in June 2010 

and acknowledged that AT&T’s ‘‘[c]ramming protection is not 100 percent guaranteed to catch all third party billing.’’ He added, ‘‘[u]nfortunately, from time 

to time a third party biller may slip through.’’ 138

• In October 2010, a Kansas consumer filed a cramming complaint with the Kansas Attorney General stating: ‘‘Also I had a block put on so I would not get 3rd 

party billings. The 3rd party billings stopped for several months. Then all of a 

sudden it started again. I asked AT&T what happened and they could not answer me. I feel if AT&T can put the 3rd party billing on my bill then they can 

29 

139 Consumer complaint to Kansas Office of the Attorney General (Oct. 13, 2010) (produced 

to Commerce Committee by daData, Inc. without Bates numbers). 140 Internal AT&T e-mail (Mar. 10, 2010) (AT&T Doc. CST2534124). 141 Internal AT&T e-mail (Feb. 23, 2007) (AT&T Doc. CST0792211). 142 E-mails from Transaction Clearing to Lee Liatsis (Sep. 24, 2010) (daData Doc. 

DAT366843–45). 

take it off. Also AT&T stated to pay and then try to get a refund. I am not paying a bill that I did not authorize and then hope to get my money back.’’ 139

The weaknesses of ‘‘bill blocking’’ are likely attributable to the fact that telephone 

companies did not have control over the ‘‘bill block’’ process. For example, as of 

March 2010, it appeared AT&T was forced to rely upon billing aggregators to place 

bill blocks. In March 2010, an AT&T Area Manager explained to a group of employees that, ‘‘ATT does not have a way to block 3rd party billing/cramming charges, 

however the 3rd party billers themselves can block it.’’ 140 See Appendix A for multiple examples of businesses and government offices reporting that unauthorized 

third-party charges continued to appear after requests for ‘‘bill blocking’’ had been 

made. 

Even when ‘‘bill blocking’’ is effective, it is still an imperfect safeguard against 

cramming. ‘‘Bill blocking’’ is not a default option for telephone customers. Rather, 

telephone customers have to proactively inform their telephone companies that they 

would like ‘‘bill blocking’’ to apply to their telephone numbers. Because many telephone customers are not aware that third-party billing is possible, many telephone 

customers are not aware of ‘‘bill blocking’’ until after they have been victimized by 

cramming. Consequently, even when ‘‘bill blocking’’ works, it only helps those customers who have already been harmed. 

2. Complaint Thresholds 

Multiple telephone companies informed the Committee that they use customer 

complaints to determine whether a third-party vendor is engaged in cramming. According to the telephone companies, if a third-party vendor’s number of cramming 

complaints reached a certain percentage or amount during a given time period, they 

would place the third-party vendor on an ‘‘action plan.’’ If the vendor’s complaint 

levels did not decrease, telephone companies would remove the third-party vendor 

from their billing platforms. 

While telephone companies had some success using this method to ferret out bad 

actors, it did not adequately protect telephone customers from cramming. Committee staff has investigated dozens of third-party vendors that are likely engaging 

in cramming and continue to place charges through the telephone companies’ billing 

platforms. 

Committee staff found evidence which explained why ‘‘complaint thresholds’’ repeatedly failed to root out bad actors. As detailed in Part III of this report, crammers use the ‘‘hub company’’ structure and other tactics to make their complaint 

levels appear as low as possible. An AT&T employee referred to one such practice 

when a third-party vendor attempted to apply through multiple billing aggregators. 

The employee stated, ‘‘I’m doing some research on the number of complaints under 

the subCIC Better Business Organization. They’re already established under ESBI 

and OAN and now they’re requesting to be a subCIC under Integretel. Can you say 

cramming complaint dilution????’’ 141

A good example of ‘‘complaint dilution’’ can be seen in the actions of daData, one 

of the hub companies Committee staff investigated. Over 20 third-party vendors related to daData charged telephone customers for identical ‘‘electronic fax services.’’ 

As discussed in Part V of this report, Committee staff confirmed that daData controlled the technology for this service and most, if not all, of the vendors’ operations. 

By operating multiple vendors offering the same electronic fax services, the true 

number of consumers complaining about its practices was not available to telephone 

companies. 

Committee staff obtained documents showing that telephone companies placed 

some of these third-party vendors on ‘‘action plans’’ to reduce cramming, but failed 

to terminate them from third-party billing. For example, on September 24, 2010, 

Transaction Clearing sent identical e-mails to Lee Liatsis, a daData ‘‘Managing Consultant,’’ about cramming complaints related to Fetch Unlimited, MDVM Network, 

and YCP Network. In each e-mail, Transaction Clearing stated that it ‘‘has recently 

been addressed by AT&T regarding concerns about the rising number of cramming 

complaints received each month for companies providing E-Fax services and who are 

relatively new in billing in the AT&T regions.’’ 142 In response, on October 4, 2010, 

Mr. Liatsis sent identical letters on behalf of Fetch Unlimited, MDVM Network, and 

30 

143Letters from Lee Liatsis to Transaction Clearing (Oct. 4, 2010) (daData Doc. DAT366837– 

42). 144Letter from Lee Liatsis to BSG Clearing Solutions (Feb. 20, 2009) (daData Doc. 

DAT366853). 145See Exhibit 2, ‘‘Example Telephone Bills.’’ 146 daData document produced in response to a question asking how customer service representatives categorize incoming consumer contacts. (June 22, 2011) (daData Doc. DAT366822). 147Id. 

YCP Network back to Transaction Clearing.143 In each letter, he stated, ‘‘our efforts 

should result in a decrease of AT&T complaints over the next ninety days.’’ These 

letters were identical to a letter Mr. Liatsis sent in February 2009 on behalf of 

BLVD Network to BSG, another billing aggregator, about cramming complaints 

from Verizon customers.144

Telephone companies treated these third-party vendors as separate companies, 

when, in fact, they were likely part of one common enterprise. If telephone companies had treated the twenty-five companies in the above table as one enterprise, 

they would have likely taken different actions. 

Additionally, the telephone companies never learned about many affected customers because the customers called third-party vendors or billing aggregators directly to dispute the charges on their telephone bills. This fact is not surprising, 

given that contact information for the companies is placed next to the third-party 

charges on telephone customers’ bills.145 For example, during an 8-month period in 

2010, over 200,000 telephone customers contacted daData to cancel services and 

stated that they ‘‘did not authorize,’’ ‘‘did not understand,’’ or ‘‘did not remember’’ 

enrollment.146 Over the same time period, telephone companies only forwarded 

2,746 cramming complaints to daData.147

Even if ‘‘complaint thresholds’’ did function properly and identified every thirdparty engaged in cramming, they would not adequately protect telephone customers 

from the harm the crammers caused before being caught. When third-party vendors 

are removed from telephone companies’ billing platforms for cramming, it does not 

appear that telephone companies contact customers whose bills have been charged 

by the cramming company, or otherwise make any attempt to reimburse customers 

who have already been charged. Consequently, even when telephone companies determined that a company was engaged in cramming and removed the company, 

thousands of impacted customers likely paid unauthorized charges and never knew 

it. 


713FIG5.eps
31 

148 Internal AT&T spreadsheet documenting responses received in response to communications 

sent to 100 customers enrolled in Streaming Flix (AT&T Doc. CST2379976–87). 149 Internal AT&T e-mail (July 20, 2010) (AT&T Doc. CST2379960). 150Letter from AT&T to All AT&T Billing Solutions Customers (Oct. 29, 2009) (AT&T Doc. 

CST009379). 151 Id. 152 Id. 

Streaming Flix Investigation Committee staff identified one instance when AT&T 

contacted its customers who had been charged by a company it suspected to be engaged in cramming. The customers’ responses were overwhelmingly negative toward 

the company in question, ‘‘Streaming Flix,’’ and suggested that many of the customers had not known about the charges before AT&T contacted them. For example, 

customers stated: 

• What in God’s name are you writing about? I have no idea what this service 

is and do not want it. Please cancel this ‘‘order’’ I do not want it. More importantly I have no idea what it is. 

• I do not recall this order. Please call me at the number below to further explain 

these charges. 

• No I did not authorize this charge and I want it off of my bill. Thank you for 

letting me know. 

• I have no recollection of authorizing this charge and want it immediately discontinued from our bill. 

• Please remove this immediately, I do not use extra services and can’t afford the 

extra costs. I do not remember signing up.148

As an AT&T employee was tabulating results of responses, she noted that, ‘‘I have 

sent all 100 e-mails to the customers . . . [t]o date . . . 12 said they did not order 

Streaming Flix . . . of these 12, none of them have called us to make a cramming 

complaint.’’ 149 Every AT&T customer that eventually responded informed AT&T 

that they did not order Streaming Flix. 

3. Service Prohibitions 

In 2009, AT&T announced that it had been reviewing ‘‘its policies and processes 

related to cramming, in an effort to identify changes that seem likely to reduce the 

number of cramming complaints.’’ 150 Based upon this evaluation, AT&T ‘‘found that 

voice mail (or voice messaging) and Web hosting have generated a disproportionately large number of cramming complaints.151 In response, it announced it was 

taking two steps: (1) it would no longer approve applications for third-party vendors 

that offered voice mail/messaging or Web hosting; and (2) for those third-party vendors previously approved, they could not enroll new telephone customers in their 

services.152

Given that companies offering these services were likely engaged in cramming, 

AT&T’s actions very likely curbed cramming on its customers’ telephone bills. However, evidence obtained by Committee staff suggests that these actions, although a 

step in the right direction, will not be enough to stop cramming. Telephone customers previously enrolled in these services apparently continue to be billed. Further, many companies that engaged in voice mail or Web hosting have already 

transitioned to other ‘‘services’’ that AT&T has yet to ban. 

As an example, BLVD Network, a daData-related company, had previously offered 

voice mail services at www.myblvdnetwork.com. It now offers ‘‘electronic fax service’’ 

at www.myblvdnetworkfax.com. Committee staff is aware of multiple examples of 

other third-party vendors that made similar ‘‘transitions.’’ 

32 

153 AT&T, 3rd Party Billing Project (June 29, 2009) (AT&T Doc. CST2511540–53). 154 Id. 155 Id. 

C. Awareness of the Problem 

Documents obtained by the Committee show that telephone companies are aware 

that third-party billing leads to significant amounts of cramming. Telephone company employees have repeatedly questioned why the companies are engaged in 

third-party billing and the companies’ customers have complained directly to them 

about cramming for years. In 2009 and 2010, the companies each took a closer look 

at their billing practices in an attempt to bring cramming under control. 

In the early 2000s, BellSouth, a company that is now part of AT&T, had already 

noticed that cramming was resurging, even though it had taken steps to address 

cramming in the late 1990s. A slide deck titled, ‘‘Cramming Flares Up Again,’’ explained what BellSouth was experiencing at the time. Just a few years after the 

company had instituted its first voluntary guidelines to address cramming, it was 

forced to take another look at the issue. Documents showed that that the company 

again made some progress combatting unauthorized charges, only to have the problem ‘‘resurge’’ again a few years later. 

In 2009, AT&T undertook a ‘‘3rd Party Billing Project’’ to ‘‘hold vendors accountable for AT&T’s time and costs spent in satisfying . . . 3rd party billing inquiries/ 

allegations.’’ 153 At the time, AT&T estimated that ‘‘[h]andling 3rd Party Billing 

costs . . . over $8M per year’’ in employee time, even though AT&T had entered 

into ‘‘without inquiry’’ contracts with most billing aggregators.154 ‘‘Without inquiry’’ 

contracts stipulated that ‘‘customers who call AT&T are first referred to the 3rd 

Party for problem resolution.’’ 155 Because the number of calls AT&T received about 


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156 Internal AT&T e-mail (July 13, 2009) (AT&T Doc. CST0184626). 157 Internal AT&T e-mail (Nov. 5, 2009) (AT&T Doc. CST2476031). 158 Internal AT&T e-mail (Nov. 1, 2009) (AT&T Doc. CST0269209–10). 159 Id. 160 Id. 161 Internal AT&T e-mail (Dec. 11, 2009) (AT&T Doc. CST2470073). 162 Comments of AT&T Inc., Federal Communications Commission, CC Docket No. 98–170 

(Oct. 13, 2009). 163 Id. 164 Internal Verizon e-mail (Oct. 2, 2008) (Verizon Doc. VZl007l003542–43). 165 Internal Verizon e-mail (Jan. 13, 2009) (Verizon Doc. VZl004l229580). 166 Id. 167 Internal Verizon e-mail (Feb. 19, 2010) (Verizon Doc. VZl004l133605). 168 Id. 

third-party billing was so voluminous, AT&T evaluated its ‘‘time and costs handling 

3rd party inquiries ‘without inquiry.’ ’’ Even ‘‘without inquiry’’ calls were costing 

AT&T a significant amount of money. 

Internal e-mail communications between AT&T employees also showed that the 

company was aware that cramming was a major problem. 

• An employee noted in July 2009 that, ‘‘although third-party billing complaints 

were down for the month (–17 percent), they again were the top wireline issue 

for the month.’’ 156

• A couple months later, in response to a complaint, a senior executive in AT&T’s 

Washington office stated, ‘‘I thought we’d ended this practice—what are we 

doing? And do we want to invite an FCC rule?’’ 157

• Another AT&T employee noted that, ‘‘It seems like we are handling a lot of 

Service calls for situations that are not related to our services.’’ 158 In response, 

an employee from AT&T customer service department stated, ‘‘This is definitely 

an area where we can reduce costs and improve customer perception of 

AT&T.’’ 159 He explained that, ‘‘wholesale benefits from getting the revenue 

while we [customer service] bear most of the expense—so there’s not a strong 

financial link to make sure the right controls are in place.’’ 160

• A month later, in response to a cramming complaint, another AT&T employee 

noted, ‘‘[w]e’re having a resurgence in 3pb [third-party billing] complaints.’’ 161

As AT&T was determining ways to decrease the amount of time its employees 

spent answering calls related to third-party billing, AT&T’s outside counsel reported 

to the FCC that it experienced ‘‘low rates of complaints’’ for cramming.162 The companies’ outside counsel went as far as reporting that ‘‘the current data could very 

well overstate the actual incidence of cramming.’’ 163

In 2009 and 2010, Verizon employees also expressed concern about cramming and 

third-party billing. 

• In October 2008, a Verizon employee explained that ‘‘[a]lot of time is spent on 

Regulatory issues.’’ She stated, ‘‘There are cramming complaints i.e., customer 

complaints re fraud, being billed for things they didn’t do, which often escalate 

to Ivan’s desk, PUC Complaints or lawsuits.’’ 164

• In January 2009, a Verizon employee asked, ‘‘[w]hat are these charges?’’ and 

‘‘[w]hy do third party charges get on our customer’s bills?’’ 165 He explained, 

‘‘[w]e are seeing a lot of calls into our centers for the same reasons . . .’’ 166

• In February 2010, a Verizon Service Mentor stated in an e-mail that, ‘‘[m]yself 

and several reps have noticed a significant increase in calls related to cramming 

charges.’’ 167 He wrote: ‘‘My question/concern is, what is being or can be done 

about this . . . this is killing our access and time on the phones. Are these companies actually being ‘investigated’ to see why they are able to keep billing our 

customers? It seems [to] be the same companies every time. From a legal standpoint, can Verizon do anything to stop these companies that continue to bill our 

customers over and over. I guarantee you if someone pulls the cramming log 

you will see USBI, OAN, and other companies similar to those.’’ In response, 

another Verizon employee stated, ‘‘Thanks . . . we terminate anyone who does 

that and we’re able to prove it. I think the problem is many instances are not 

reported.’’ 168

D. Response to Customers 

Documents obtained through the investigation showed that the telephone companies’ employees often did not follow the companies’ written procedures for resolving 

customers’ cramming complaints. Customers seeking assistance have frequently 

been told by telephone company employees that there is nothing they can do to help, 

34 

169 Committee staff is not suggesting that telephone companies informed every customer that 

there was nothing the company could do to resolve the unauthorized charges appearing on their 

bills. Rather, Committee staff has reviewed enough complaints where employees stated there 

was nothing they could do to know that it happened with some frequency. 170 Consumer Complaint to Oregon PUC (Mar. 2, 2009) (Qwest Doc. QSC0014058). 171Letter from Barbara Van Gelder, Counsel to Qwest, to Senator John D. Rockefeller IV 

(July 16, 2010). 172 Consumer Complaint to Verizon (Dec. 3, 2009) (Verizon Doc. VZl003l001869). 173Letter from Mark J. Montano, Verizon Assistant General Counsel to Erik Jones, Counsel 

to the Senate Commerce Committee (July 30, 2010). 174 Consumer Complaint to Better Business Bureau of Connecticut (Aug. 21, 2009) (AT&T Doc. 

CST009842). 175 AT&T has informed its employees that they ‘‘should not inform customers that AT&T is 

required to provide billing and collection services to unaffiliated service providers.’’ (AT&T Doc. 

CST010281). 176 Verizon e-mail (Dec. 30, 2008) (Verizon Doc. VZl004l211426). 177 Verizon e-mail (Jan. 7, 2009) (Verizon Doc. VZl004l211425). 

and that telephone companies were legally obligated to place the charges on their 

bills. Both assertions are incorrect. 

1. Customer Assistance 

Committee staff reviewed thousands of cramming complaints that residential and 

business customers submitted to the BBB, FTC, FCC, state attorneys general, and 

their telephone companies. These complaints showed that telephone companies repeatedly informed customers that there was nothing they could do to resolve the unauthorized charges appearing on their telephone bills.169 Hundreds of complaints reviewed by Committee staff contradicted what telephone companies informed the 

Committee about their policies. Examples included: 

• A Qwest customer stated, ‘‘I called Qwest twice but they would only refer me 

to ILD [a billing aggregator] to resolve the problem,’’ 170 while Qwest informed 

the Committee that it ‘‘does not refer the customer to the billing aggregator or 

vendor for resolution of the dispute. Qwest resolves the dispute directly.’’ 171

• A Verizon customer stated in a complaint that, ‘‘she has been told by over 8 

different people from the Verizon Business Office that since this is a 3rd party 

billing issue Verizon cannot assist her,’’ 172 while Verizon informed the Committee that ‘‘Verizon does not require the customer to contact the sub-CIC that 

initiated the charge prior to removing the charges.’’ 173

• In an online chat with an AT&T customer service representative, an AT&T customer asked, ‘‘how can I prevent this [unauthorized charges] from happening’’ 

and the AT&T employee responded, ‘‘We have no way to prevent the problem 

from happening.’’ 174

See Appendix A for additional examples of consumers and businesses complaining 

about their telephone companies’ inadequate responses to the unauthorized charges 

appearing on their telephone bills. 

2. No Legal Obligation 

Complaints also showed that telephone company employees repeatedly misinformed customers about the telephone companies’ role in third-party billing. Although documents showed instances in which the telephone companies appear to 

have instructed their employees that they voluntarily engage in third-party billing,175 employees for the telephone companies repeatedly informed customers that 

the telephone companies were legally obligated to place the charges on their bills. 

These statements were inaccurate and confused telephone customers about the nature of the problem. 

Committee staff reviewed many complaints where telephone company employees 

made incorrect statements about third-party billing, suggesting that, at one time, 

they were trained to inform customers of this ‘‘legal obligation.’’ Examples included: 

• In December 2008, a Verizon employee informed a Constituent Services Specialist in the Office of U.S. Representative Chris Van Hollen that, ‘‘[w]e are required by law to open our billing system to other companies,’’ in response to his 

e-mail about a constituent with a cramming complaint.176 After he informed her 

that the constituent was ‘‘pretty fired up about it,’’ she responded, ‘‘I’m not sure 

what there would be to do about it—it’s in the Federal Communications Act 

. . . cramming is NOT as big an issues as it was years ago.’’ 177

• In February 2009, an AT&T employee stated that is ‘‘not allowed to reject thirdparty charges billed by third parties that offer telecommunications and related 

services. Local exchange carriers are prohibited from refusing to include the 

35 

178 Better Business Bureau, Complaint Activity Report, Case No. 27071953 (Feb. 3, 2009) 

(AT&T Doc. CST009649). 179 Consumer Complaint to Verizon (Dec. 3, 2009) (Verizon Doc. VZl003l001954). 180Qwest Internal e-mail (Aug. 2, 2010) (Qwest Doc. QSC0015630). 181Letter from Timothy P. McKone, AT&T Executive Vice President for Federal Relations, to 

Senator John D. Rockefeller IV (Mar. 4, 2011). 182 Verizon document, Summary of Actions Taken/Planned by Verizon To Strengthen AntiCramming Protections (Apr. 19, 2011). 

charges in the customer’s local bill and cannot question the validity of the 

charges.’’ 178

• In October 2009, a Verizon customer stated, ‘‘When I spoke to Verizon, they told 

[me] that an FCC regulation mandates that they bill me on behalf any third 

party request.’’ 179

• In August 2010, a Qwest employee stated, ‘‘Qwest and other local exchange carriers (LEC) have an obligation to provide billing and collection services to third 

parties, when requested, under the same terms and conditions.’’ 180

See Appendix A, ‘‘Cramming Case Studies,’’ for additional examples of telephone 

companies misinforming telephone customers about their legal obligation to place 

third-party charges on their customers’ telephone bills. 

E. Recent Responses to the Cramming Problem 

AT&T and Verizon have each informed the Committee that they have taken steps 

in recent months to further strengthen their anti-cramming safeguards. In March 

2011, AT&T informed the Committee that it had made ‘‘several significant enhancements’’ to its third-party billing program. These enhancements included: ‘‘minimum 

‘baseline’ verification requirements that will apply to all transactions;’’ ‘‘heightened 

verification requirements for Internet-based transactions;’’ and additional requirements for billing aggregators.181

In April 2011, Verizon informed the Committee that it was taking three steps to 

strengthen its anti-cramming safeguards: prohibiting third-party vendors from using 

‘‘open affiliate networks’’ to market their services; revising its agreements so that 

third-party vendors rejected or terminated by other telephone companies are automatically precluded from billing on Verizon’s platform; and notifying new customers, 

in welcome letters, that ‘‘bill blocking’’ is available.182

VII. Conclusion 

Although some legitimate companies use third-party billing on landline telephone 

bills, it has largely failed to become a reliable method of commerce. Instead of ‘‘creating conveniences’’ for telephone customers, as telephone companies promised it 

would, third-party billing has made telephone customers targets for fraud. Despite 

the telephone companies’ decision to enact voluntary anti-cramming guidelines and 

the FCC’s ‘‘Truth-in-Billing’’ requirements, it still takes minimal effort for a company engaged in cramming to place unauthorized third-party charges on consumers’ 

bills, while it remains difficult for customers to find and remove those charges from 

their telephone bills. As a result, unless additional protections are put in place, millions of telephone customers will likely continue to face billions of dollars of unauthorized charges. 

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Appendix A 

Cramming Case Studies 

During the Committee’s investigation, Committee staff spoke with hundreds of 

residential consumers and dozens of nonresidential consumers about their experiences with cramming on their landline telephone bills. Both residential and nonresidential consumers reported that they are angry they had to spend time and money 

trying to cancel unauthorized services and recoup the dollars lost to cramming. Consumers also reported that they are frustrated by the way their telephone companies 

have responded to their cramming complaints. 

Committee staff believes that the cases discussed below provide a representative 

example of consumers’ experiences with cramming. The cases highlighted include: 

residential consumers, small and large businesses, not-for-profit organizations, and 

Federal, state and local governments. In presenting the cases, Committee staff is 

not including the names of the businesses that spoke to Committee staff about 

cramming. Some businesses stated that they did not want to acknowledge publicly 


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1Some businesses cited similar concerns in declining to provide Committee staff any information regarding their experiences with cramming. 2 Committee staff telephone interview with Gordon Jones (June 6, 2011); E-mail from Gordon 

Jones to ESBI (Feb. 2, 2010); E-mail from Gordon Jones to California Public Utilities Commission (Jan. 13, 2010); E-mail from Gordon Jones to FCC (Jan. 16, 2010). 3 Committee staff telephone interview with Jennifer Ngah (June 27, 2011); Complaint from 

Jennifer Ngah to FCC (Mar. 5, 2010) (Verizon Doc. VZl003l002478). 

the extent to which they have experienced cramming. Others expressed concern that 

publicly discussing cramming could negatively affect their relationships with telephone companies that, in some instances, are both their service providers and their 

clients.1

Table of Contents 

I. Residential Consumers 

II. Small Businesses 

III. Large Businesses 

IV. Nonprofit Organizations 

V. Federal Government 

VI. State and Local Government 

I. Residential Consumers 

Gordon Jones—Gridley, California 2 In January 2010, retired consumer, Gordon 

Jones, read an article that warned consumers about cramming. Mr. Jones then reviewed his own telephone bills and discovered that four different third-party vendors—E-mail Discounts, Intelicom Messaging, Total Protection Plus, and Debt Toolbox—had been cramming charges onto the bills for years. 

Mr. Jones began sending e-mails to the third-party vendors and their billing 

aggregators to cancel the services and request refunds. In an e-mail to one of the 

billing aggregators, he explained that he had not authorized these services. He said: 

I must again reiterate that I have had no known contact with these 3 providers. 

I know of no services that they claim to have provided to me. I deny ever knowingly agreeing to any business relationship with them whatsoever. The implied 

services that they appear to provide (based strictly on my review of their company names) are not now, nor have they ever been, needed by me or my family. 

In another e-mail, Mr. Jones asked one of the third-party vendors to provide proof 

that he had authorized enrollment in its service. Upon reviewing the supposed proof 

of authorization, he realized that the enrollment had allegedly occurred at a time 

when he and his wife were camping in a remote section of the state, without cell 

phone or Internet service. 

Mr. Jones wrote in a complaint to the California Public Utilities Commission that 

when he ‘‘contacted AT&T about the issue—[he] was told to read the small print, 

be careful what boxes you check, etc.’’ He also filed a complaint with the FCC that 

stated, in part: 

This is a continuing problem and it needs to be addressed and brought under 

control. Clearly, under the Telecommunications Act of 1996 enterprising criminals have found a sure fire way to use 3rd party billing as a lucrative fraudulent scheme. 

After three months of fighting, Mr. Jones received more than $1,000 in credit on 

his telephone bill. However, despite having asked AT&T to block all third-party 

charges, he noticed in December 2010 that he had been crammed again by a company called CelebNewsAddict. 

Jennifer Ngah—Fitchburg, Massachusetts 3 In February 2010, Jennifer Ngah noticed that the amount of her automatic bill payment to Verizon seemed to be increasing each month. To determine the cause for the increased payments, Ms. Ngah 

reviewed her bill and discovered that several third-party vendors were charging her. 

One of the vendors had been charging her for over six months. 

Frustrated with the lack of assistance she received from Verizon, Ms. Ngah complained to the FCC. In her complaint, she wrote: 

Over the last several months someone was fraudulently using my phone [number] to purchase services online. Anyone who can get a phone [number] can 

charge services to this [number]. 

64 

4 Committee staff telephone interview with Barbara Arnold (June 3, 2011); Consumer Complaint to Pennsylvania Office of the Attorney General (Apr. 3, 2010) (produced to Commerce 

Committee by daData, Inc. without Bates numbers). 5 Committee staff telephone interview with Jack Murray (June 6, 2011); Letter from Jack 

Murray to the Public Utility Commission of Texas (Aug. 4, 2010) (produced to Commerce Committee by daData, Inc. without Bates numbers). 6Letter from owner of physical therapy and rehabilitative services business to Senator John 

D. Rockefeller IV (Apr. 26, 2011); Committee staff telephone interview with physical therapy 

business owner and employee (Apr. 25, 2011). 

The complaint goes on to describe the burden of trying to remedy the situation, 

stating, ‘‘when I notified Verizon they said they were not responsible . . . I spent 

hours notifying these third party companies and trying to get my money back.’’ 

In the end, Ms. Ngah only received credit for three months from one of the thirdparty vendors that crammed charges onto her telephone bills, and no assistance 

from Verizon. 

Barbara Arnold—Uniontown, Pennsylvania 4 In March 2009, Barbara Arnold, a 

nurse, contacted Verizon to look for ways to lower her family’s monthly telephone 

bill. She was surprised when Verizon suggested that she consider canceling some 

of the enhanced services Verizon said she was enrolled in. She had never noticed 

that she was paying for services from three separate third-party vendors, two of 

which were for voice-mail. After talking to Verizon, she discovered that those thirdparty vendors had crammed more than $220 of charges onto her telephone bills. 

Although Verizon alerted her to the extra charges, Verizon was unwilling to assist 

her or refund any of her money. Verizon instead told her she would need to contact 

each of the third-party vendors. The third-party vendors were reluctant to refund 

her money, arguing that she had authorized the services. Ms. Arnold responded by 

saying that she had ‘‘NEVER approved or accepted such services and this was clearly evident when one company stated an incorrect mother’s maiden name as a security check for the account.’’ 

Ms. Arnold filed a complaint with Pennsylvania Attorney General on April 3, 

2010. Her complaint states: 

It sickens me that this can happen and I feel I was taken advantage of . . . 

I am a professional nurse and working mother and neither I nor my husband 

have time to watch our bills so closely and then sit on the phone for HOURS 

like I did on Friday 4/1/10 to rectify this error. 

John Murray—Dallas, Texas 5 In July 2010, John Murray noticed multiple thirdparty charges on his AT&T bill that he did not recognize. Mr. Murray tried repeatedly to cancel the services and receive refunds but found the experience difficult and 

troubling. 

He described his encounters with AT&T and the third-party vendors in a letter 

to the Texas Public Utility Commission. He wrote: 

I recently received a monthly statement from AT&T. On that bill there were 

four charges that I not only didn’t authorize, I didn’t even recognize the companies involved, one charge was for a voice mail service for my dedicated fax line. 

*** 

When I contacted AT&T, they said they were ‘‘just the billing company’’ and 

couldn’t do anything about it. I then called the 800 numbers that AT&T gave 

me for the vendors. Two of them said they would issue credits, in one or two 

more billing periods. One said ‘‘we don’t give refunds’’ and the other hung up 

three times when I gave the requested phone number the charge was billed to. 

Mr. Murray concluded his letter by saying, ‘‘obviously this is a scam and the telephone company is a partner in it. What recourse do I have?’’ 

II. Small Businesses 

Physical Therapy Business 6 A self-described ‘‘small business’’ owner in Alabama 

wrote Chairman Rockefeller a letter stating that cramming has been a ‘‘detrimental’’ 

problem for his physical therapy and rehabilitative services business. In May 2010, 

the business obtained more than $450 in billing credit from a ‘‘website’’ service that 

had crammed a recurring monthly charge on its telephone bills for almost 3 years. 

To obtain that credit, the business owner and his staff ‘‘spent countless time’’ reviewing old telephone bills and talking to the telephone company and Alabama Public Service Commission. The website service claimed that one of the business’ employees enrolled the business in its service. The address that the website service 

65 

7Letter from Popeyes and Krispy Kreme franchisee employee to Senator John D. Rockefeller 

IV (May 25, 2011). 8 Committee staff telephone interview with real estate, lodging, and golf course business 

owner (Mar. 1 and 17 and June 3, 2011); E-mail messages from business owner to Commerce 

Committee staff—(Mar. 17 and 18, 2011). 9 Committee staff telephone interview with bicycle retail store co-owner (Mar. 8, 2011). 

claimed that the employee provided when she allegedly enrolled in the service is 

neither the business’ address nor the employee’s home address. 

Popeyes and Krispy Kreme Franchisee 7 An employee of a franchisee of Popeyes 

and Krispy Kreme restaurants reported in a letter to Chairman Rockefeller that 

third-party vendors crammed six of the company’s telephone accounts for many 

months with recurring monthly charges for services such as electronic facsimile. 

After working for two months to resolve the issue, the company obtained approximately $4,200 worth of billing credits. 

When the company initially discovered cramming on its telephone bills in October 

2010, the company called AT&T for assistance. AT&T told the company that it receives a lot of calls about cramming and told the company that it needed to call the 

third-party vendors directly to cancel the crammed charges and request billing credits. 

When a company employee contacted one of the third-party vendors to try to seek 

billing credit, the vendor initially refused to provide any credit. After the company 

employee asked the vendor to play recordings of the conversations in which company employees allegedly had enrolled in the vendor’s services, the vendor agreed 

to provide credits. The vendor never played any such recordings for the company. 

The company’s letter to Chairman Rockefeller explains that company employees 

had to spend a lot of time dealing with cramming and that some of the company’s 

restaurant managers even lost bonuses because the crammed charges affected their 

restaurants’ profit and loss statements. The letter states: 

It certainly is annoying and a hassle to deal with additional administrative paperwork, making additional phone calls and keeping information organized especially for charges not requested. Our already busy Accounting Department 

had to deal with their own administrative issues such as re-adjusting Profit and 

Loss statements, etc. The inconvenience and cost of administrative work on this 

issue pales in comparison to what it has taken away from the managers of our 

restaurants. 

Our managers work long hours in a busy, demanding environment all with a 

smile on their faces. They have a tremendous job juggling employee relations, 

customer satisfaction and controlling costs. And some of our managers, no matter how hard they worked and no matter how much they earned it, did NOT 

receive bonuses because of cramming. Due to Year End, many P&L statements 

were not able to be fully corrected and therefore bonuses were lost. 

It is infuriating to me that it is legal for companies to, without authorization, 

charge our businesses and skew our Profit and Loss statements and, in effect, 

take money out of the hands of hard working, deserving men and women. 

Real Estate, Lodging, and Golf Course Business Owner 8 The owner of several 

businesses in Nevada told Committee staff that he discovered in February 2010 that 

seventeen different third-party vendors had been cramming charges onto the businesses’ AT&T telephone bills for services such as online business listings, voice-mail, 

identity theft protection, and streaming video for as long as twenty months each. 

He was particularly surprised to discover the various third-party charges because 

he believed that he had previously requested that AT&T block his telephone lines 

from third-party billing. 

AT&T told him that he needed to contact the various billing aggregators or thirdparty vendors to cancel the charges and seek billing credits. After spending more 

than 60 hours working on the issue, including filing complaints with his Congressman and law enforcement agencies, he obtained partial billing credits for the unauthorized charges totaling more than $4,000. He was not able to obtain full credit 

for some of the individual charges. He has now switched his business telephone 

service to a company that does not permit third-party billing on business lines. 

Bicycle Retail Store 9 A bicycle store in Illinois told Committee staff that it discovered in December 2010 that its AT&T telephone bills included unauthorized charges 

for a virtual facsimile and voice-mail service called Contact Message Tech II. The 

charges totaled approximately $1,500 over a 30-month period. 

Contact Message Tech’s billing aggregator, ILD, initially offered the bicycle store 

a six-month refund. When the bicycle store co-owner later contacted Contact Message Tech to demand a full refund, a Contact Message Tech representative told the 

66 

10 Committee staff has obtained a copy of the recorded telemarketing call that Contact Message II claims is its proof that the bicycle store enrolled in its service. The recorded telemarketing call refers to a service called ‘‘Advanced Business Services’’ but does not refer to 

‘‘Contact Message Tech.’’ Both Contact Message Tech and Advanced Business Services are associated with daData, Inc. 11 Committee staff telephone interview with industrial service company employee (May 26, 

2011). 12 Committee staff telephone interview with drug store owner (Apr. 19, 2011). 13 Committee staff telephone interview with bank #1 employees (May 24, 2011). 

bicycle store that one of the bicycle store’s authorized employees had enrolled the 

bicycle store in its service during a telemarketing call. Contact Message Tech played 

the bicycle store co-owner a recording of that telemarketing call, and she determined 

that the person who purportedly consented to enroll the bicycle store in Contact 

Message Tech was not an employee of the bicycle store. The bicycle store co-owner 

also observed that the Contact Message Tech representative spoke so quickly on the 

recording that it was difficult to understand what he said.10 The bicycle store coowner asked Contact Message Tech to identify the telephone number that it had 

called to telemarket its service to the bicycle store, and Contact Message Tech declined to do so. Contact Message Tech then agreed to provide the bicycle store a full 

refund. 

The bicycle store co-owner contacted AT&T to ask why parties other than AT&T 

could place charges on the store’s telephone bill. To her surprise, AT&T told the bicycle store that its telephone bill could be used like a credit card. AT&T told the 

bicycle store that it could block third-party charges from appearing on the store’s 

future telephone bills, but stated that AT&T’s ‘‘hands are tied’’ unless a customer 

requests third-party blocking. 

Industrial Service Company 11 An industrial service company in Virginia told 

Committee staff that it has battled cramming on its Verizon landline telephone bills 

since 2007 for services such as voice-mail and credit repair. The company has sometimes had trouble finding a way to contact the third-party vendors that have placed 

charges on its bills. The company requested that Verizon block its telephone lines 

from incurring third-party charges, but it later incurred additional third-party 

charges on the same lines. The company complained to state regulators that its employees continued to have to spend time identifying and resolving crammed charges 

because Verizon’s blocking system did not work. The company also advocated for 

state legislation to prevent cramming. 

Drug Store 12 A drug store owner in Missouri told Committee staff that his store incurred almost $650 worth of unauthorized third-party charges on its landline telephone bills for purported ‘‘technical support’’ between late 2009 and late 2010. When 

the drug store owner contacted AT&T to inquire about the charges, AT&T told him 

that he needed to call the third-party vendor or billing aggregator to dispute the 

charges. The drug store owner then contacted the billing aggregator, and the billing 

aggregator stated that a drug store employee enrolled in the technical support service during a telemarketing call. Although the drug store owner asked to hear a recording of the telemarketing call, the billing aggregator did not play it. 

None of the drug store’s employees recall enrolling in the technical support service. The drug store owner told Committee staff that when telemarketers call to solicit the drug store’s business, they try to solicit ‘‘yes’’ answers to questions so that 

they can record the answers and use them to say that the business agreed to enroll 

in their services. The drug store contacted the Missouri Attorney General’s Office 

for assistance in obtaining a refund for the unauthorized charges. 

III. Large Businesses 

Bank #1 13 A large, multistate bank told Committee staff that third-party billing 

on landline telephone bills is a ‘‘rife opportunity for fraud.’’ Cramming has been a 

problem on the bank’s landline telephone bills from multiple telephone companies 

since at least 2009. The bank has identified 75 different vendors that have crammed 

charges onto its telephone bills for services such as music downloads, voice-mail, 

and directory assistance. The bank reported that it is difficult to identify crammed 

charges, in part, because the crammed charges are spread out among the thousands 

of pages of the many telephone bills the bank receives each month. 

The bank’s contracts with the telephone companies identify only one employee as 

being authorized to order telephone services for the bank. Consequently, the bank 

does not understand why the telephone companies add third-party charges to its 

bills without requiring proof that the single authorized employee has ordered the 

third-party services. The bank told Committee staff that third-party entities should 

not be exempt from the bank’s contractual requirements with the telephone companies regarding who is authorized to order telephone services. 

67 

14 Committee staff telephone interview with bank #2 employee (May 5, 2011). 15 Committee staff telephone interview with bank #3 employee (Apr. 25, 2011). 16 E-mail message from bank #3 employee to Commerce Committee Staff (June 20, 2011); 

Committee staff 

The bank stated that the third-party vendors, billing aggregators, and telephone 

companies have not been helpful. Some third-party vendors have refused to cancel 

their charges on the grounds that the bank employee who called to dispute the 

charges did not call from the same telephone number that the vendor was charging 

for the third-party service. The bank said that the telephone companies require the 

bank to prove that third-party charges are not authorized rather than requiring the 

third-party vendors to prove that the charges are authorized. 

About a year ago, AT&T told the bank that AT&T is legally required to allow 

third-party billing. AT&T stated that it could block particular third-party vendors 

from placing charges on the bank’s telephone lines if the bank provided AT&T 

spreadsheets that contain the bank’s billing telephone numbers and a list of the 

third-party vendors that have crammed the bank’s lines in the past. Even after the 

bank provided that information to AT&T, the bank continued to incur crammed 

charges on telephone lines that it asked AT&T to block from third-party billing. 

Bank #2 14 Another large multistate bank told Committee staff that it has incurred hundreds of unauthorized third-party charges on its landline telephone bills 

since 2005. When the bank contacts a billing aggregator to dispute unauthorized 

third-party charges on particular lines, it requests that the aggregator block future 

third-party charges from being placed on those lines. Nevertheless, new third-party 

merchants subsequently cram charges on those same lines. The bank has not requested that its telephone companies block all of its lines from all third-party billing 

because the bank believes it would be very difficult to create a list of all of the 

bank’s telephone bills, and it believes that the telephone companies cannot implement blocking unless the bank provides such a list. AT&T has told the bank that 

it is legally required to permit third-party billing. 

Bank #3 15 A third multistate bank reported that third-party charges have been 

crammed onto many of its telephone lines, including lines for vaults and fire alarms 

and other lines with unpublished telephone numbers. This bank stated that the 

crammed charges sometimes total hundreds of dollars per month. The bank also reported that it has experienced large increases in cramming when it has added large 

numbers of new lines to its telephone bills after acquiring other financial institutions. Multiple telephone companies have told this bank that they cannot block its 

lines from incurring third-party charges. Verizon recently told the bank that it 

would try to block the bank from incurring third-party charges in one state by imposing a block on the bank’s billing telephone numbers, but Verizon stated that it 

was not yet ready to try to implement a similar block in other states. 

Bank #4 16 A fourth major bank reported that it has been battling cramming on 

its landline telephone bills from multiple telephone companies for several years. The 

bank experiences cramming most often on the bills it receives from the largest telephone companies. Between May 2010 and April 2011, the bank identified 360 instances of cramming on its landline telephone bills. The bank stated that it ‘‘is quite 

arduous and time consuming’’ to address crammed charges. Its employees spend an 

average of thirty minutes addressing each crammed charge. The bank reported that 

it has endured ‘‘a lot of scripted conversations’’ when it has contacted third-party 

vendors to try to dispute charges that the vendors have crammed on the bank’s telephone bills. Some third-party vendors ‘‘fight tooth and nail’’ when the bank disputes 

crammed charges. 

The bank has identified crammed charges for services such as voice-mail, long distance calling plans, diet plans, credit protection plans, webhosting, online coupons, 

identity theft protection, music downloads, photo storage, electronic facsimile, and 

ringtone downloads. Its telephone bills have included crammed charges that were 

billed to spare lines that were not assigned to any employee and to lines for automated teller machines, alarms, facsimile machines, modems, and equipment monitoring. The bank does not rely on third-party landline telephone billing as a way 

to pay for any services that it has authorized. 

In 2008, the bank complained to the FCC regarding cramming on its landline telephone bills. The bank states that its request for the telephone companies to block 

third-party charges from all its telephone accounts, and its ongoing efforts to provide the telephone companies with updated lists of all of its telephone accounts, 

have subsequently reduced the amount of cramming on its telephone bills. 

68 

17 Committee staff telephone interview with bank #5 employee (June 22, 2011). 18Letter from auto parts retailer to Senator John D. Rockefeller IV (June 28, 2011). 19 As an example of its ongoing problem with cramming, the auto parts retailer told Committee staff that a new company store recently incurred almost $400 worth of crammed charges 

on its first 2 monthly telephone bills. Committee staff telephone interview with auto parts retailer employee (May 20, 2011). 

Bank #5 17 A fifth large multistate bank began to notice cramming on its landline telephone bills in 2010. The bank has since identified approximately $20,000 of 

crammed charges during the first several months of 2011 for services such as fraud 

alerts, identity theft protection, voice-mail, music downloads, and long distance. 

Many of the charges have been crammed onto unpublished telephone numbers for 

modems, alarms, facsimile machines, and other telephone lines that are not assigned to individual employees. 

The bank is not aware of any instance in which any of its employees authorized 

any third-party charges on the bank’s telephone bills. In 1 month, the bank contacted approximately fifty employees whose telephone lines had incurred third-party 

charges. None of the employees stated that they had signed up for the services for 

which their lines had incurred charges. 

When the bank requested that AT&T assist it in dealing with cramming, AT&T 

stated that it is legally required to permit third-party billing on its telephone bills. 

AT&T initially helped the bank cancel and receive billing credit for some of the 

charges that had been crammed onto its bills, but AT&T later ‘‘politely backed off’’ 

and stated that the bank needed to contact the third-party vendors itself. The bank 

now contacts the billing clearinghouses to cancel crammed charges and seek billing 

credit. The bank has not had the time to dispute all the crammed charges it has 

identified. The bank reported that third-party billers and billing clearinghouses 

‘‘make it hard to [dispute their charges] quickly.’’ 

The bank used to receive summary telephone bills that made it difficult to identify crammed charges and made it difficult to dispute the crammed charges because 

the bank could not identify which individual telephone lines had incurred crammed 

charges and which third-party vendors had crammed them. The bank now receives 

more detailed telephone bills that provide this information. 

Auto Parts Retailer 18 A large, nationwide auto parts retailer sent Chairman Rockefeller a letter estimating that the company has incurred $550,000 in unauthorized third-party charges on its telephone bills during the past 10 years. The company estimates that three full-time employees spend approximately 25 percent of 

their time dealing with cramming, thereby having cost the company approximately 

26,000 labor hours and approximately $400,000 in overhead expenses. Approximately 80 percent of the company’s more than 3,600 locations have had charges 

crammed onto their landline telephone bills. 

The company reported that it took years for one of the major telephone companies 

to assist the company with cramming by blocking third-party charges from its telephone bills. And the company explained that it still regularly experiences cramming 

on the telephone bills that it receives from that particular telephone company for 

new company locations even though the company requests blocking of third-party 

charges whenever it orders lines for new locations. The company’s letter to Chairman Rockefeller states: 

During our communications with the various carriers, we sought ways to block 

third party billing to our accounts. Some regional bell operating centers 

(RBOCs) were willing to find work arounds for this issue; others insisted there 

was nothing they could do about it. We were however astounded and amazed 

when one of our billing analysts discovered a flyer in an envelope with one of 

the individual bills we received from one of the carriers who had insisted it was 

out of their hands. The flyer explained customers could now ‘‘block’’ third party 

billing. When we approached our assigned account team at the carrier with the 

flyer, they requested a copy and advised they would have to investigate. We 

have however followed consistently and persistently with them over a period of 

2 years and are now able to block third party billing from existing accounts. 

Of course, we believe our ability to do this is a direct result of our tenacity. 

The ability to block on existing account[s] however has not allowed us to eradicate the practice of cramming. As a growing company, we frequently open new 

stores. Typically, we will open in excess of 150 new locations each year. Despite 

the fact we request a block on third party billing with each new order, we typically see third party charges on the first and or second month’s bill from this 

carrier.19

*** 

69 

20 Committee staff telephone interview with office property committee employee (June 3, 

2011). 21 Committee staff telephone interviews with movie and game store chain employee (June 7 

and 24, 2011); daData Docs. DAT366879–80. 

Often, the carriers simply refer you to the third party biller or their third party 

clearinghouse. Often, they will attempt to persuade that someone within the 

company signed up for and authorized the services by phone or through the 

Internet. [We have] consistently trained local store managers and communicated to carriers that local store managers lack the authorization to bind the 

corporation for these services. While we expect a team member to make a mistake from time to time, we believe our training is effective and view the continuation of cramming a purposeful decision on the part of carriers to circumvent communication to them regarding our corporate authority structure. In 

addition, our team members do not have store access to the Internet. It seems 

unlikely they would go home and sign up their store for any of these services. 

There have been times when recordings have been made to evidence the alleged 

purchase of services. While some calls sound legitimate, others, in our opinion 

do not. The carriers or clearinghouses cannot and/or do not ever produce any 

documentation purporting to actually be signed by an employee with any authority. One might only surmise that doing so results in a pecuniary benefit, 

not only to the crammers, but to the LEC’s. 

*** 

Whether the consumer is an individual or corporation, we view the practice of 

cramming as unethical and fraudulent. We ask the committee to recommend 

proposed legislative action to preclude this practice including an express statutory private right of action and include equitable and damage remedies as well 

as an attorney fee provision and punitive damages based upon a finding that 

conduct is pervasive, egregious or outrageous. 

Real Estate Company 20 A company that owns, operates, and manages office properties in several states told Committee staff that it has spent ‘‘an amazing amount 

of time’’ over a two-year period to try to get cramming ‘‘under control.’’ The company’s landline telephone bills have sometimes contained twenty to fifty crammed 

charges per month, including charges that were attributed to telephone lines for elevators and alarms. The company has received more than $10,000 in billing credits 

for crammed charges. The company recently switched some of its telephone service 

to a telephone company called Granite, in part, because Granite does not allow 

third-party billing on its telephone bills. 

The company has complained about cramming many times to the multiple telephone companies that have allowed third-party charges to be included on its telephone bills. Those telephone companies, in turn, have done little more than acknowledge that they receive a lot of complaints about cramming. 

For example, the company told Committee staff it was very difficult to get the 

telephone companies to block the company’s lines from cramming. Verizon told the 

company that it had implemented blocking on the company’s Verizon telephone lines 

but later said that they had blocked the lines from something other than third-party 

billing because of the manner in which the company phrased its request. AT&T told 

the company that it had only limited ability to block the company’s lines from thirdparty billing and that AT&T’s ability to implement blocking varies in different regions of the country. Even after AT&T told the company that it implemented blocking on particular telephone lines, the company incurred additional unauthorized 

third-party charges on those same lines. 

Receiving its telephone bills in electronic format made it difficult for the company 

to cancel crammed charges. The electronic bills attribute the crammed charges to 

the main telephone number listed on each bill rather than the individual telephone 

numbers that individual third-party vendors claim to have enrolled in their services. 

Consequently, the company has had difficulty canceling third-party charges when it 

has contacted billing aggregators or third-party merchants because the company has 

not been able to specify which particular telephone numbers have incurred charges 

for the services. 

Movie and Game Store Chain 21 A large, multistate movie and game store chain 

whose corporate policy requires the corporate office to authorize all services that are 

billed to the stores’ telephone bills regularly incurs thirty to fifty crammed charges 

per month on the stores’ telephone bills. Before the company began systematically 

checking for and disputing crammed charges, the company incurred even more 

crammed charges. Each crammed charge costs as much as $100 per month for servVerDate Nov 24 2008 08:45 Dec 15, 2011 Jkt 071640 PO 00000 Frm 00073 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\71640.TXT SCOM1 PsN: JACKIE
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22 E-mail message from food and beverage retail chain employee to Commerce Committee Staff 

(June 20, 2011); Committee staff telephone interview with food and beverage retail chain employees (June 16, 2011). 23 Committee staff telephone interview with hospital system employee (Apr. 25, 2011). 

ices that the company already provides its stores, or services that the stores do not 

want. 

The company sends its employees a memo regarding cramming three times per 

year to remind employees, for example, to hang up when telemarketers call the company’s stores. The company believes that some third-party vendors that cram 

charges onto its stores’ telephone bills manipulate recordings of telemarketing calls 

to make it seem like company employees answered ‘‘yes’’ when they were asked 

whether they wanted to enroll in the third-party vendors’ services, when they actually answered ‘‘yes’’ in response to other questions that had nothing to do with enrolling in the services. Employees in some stores that have incurred crammed 

charges recall that they specifically told a telemarketer that they did not want to 

enroll in the third-party services for which their stores have incurred charges. Because employees do not have access to browse the Internet in the company’s stores, 

the company does not believe that its employees use the Internet to enroll their 

work telephone numbers in third-party services. 

During the Commerce Committee’s investigation, the Committee obtained copies 

of the records that purport to evidence the enrollment of two of this company’s 

stores in services that are associated with daData, Inc.: USA Voice-mail and 

Meteline Voice. Both of the authorization records contain the names of actual employees of the company and the correct addresses and telephone numbers of company stores, but they both contain invalid e-mail addresses that both misspell the 

company’s domain name in an identical manner. In addition, the authorization 

record pertaining to Meteline Voice claims that a company employee enrolled one 

of the company’s Kansas stores in Meteline Voice even though that employee works 

in another part of the country. 

Food and Beverage Retail Chain 22 A large food and beverage retail chain whose 

corporate policy prohibits store employees from authorizing any third-party billing 

told Committee staff that its telecommunications expense management company has 

identified approximately $100,000 worth of crammed charges on its stores’ landline 

telephone bills during each of the past 4 years. The telecommunications expense 

management company obtains approximately 90 percent of the billing credits it requests when it seeks to cancel services that have been crammed onto the stores’ 

landline telephone bills. 

On multiple occasions, and as recently as 2010, the retail chain has asked its 

landline telephone service providers whether they can implement a universal block 

to prohibit all third-party vendors from placing charges on any of the company’s 

stores’ telephone bills. AT&T has told the company that it would be difficult or impossible to implement such a universal blocking request. 

IV. Nonprofit Organizations 

Hospital System 23 A large, nonprofit hospital system with locations in several 

states told Committee staff that it has battled cramming on its landline telephone 

bills for several years. For example, it incurred $800 worth of crammed charges on 

just one of the many telephone bills it received in March 2011. The hospital system 

employee who deals with telephone billing has contacted the Missouri Attorney General’s office and the hospital system’s telephone companies for assistance with cramming. 

The hospital system employee who deals with telephone billing periodically 

spends three consecutive days identifying and trying to cancel crammed charges. 

When she recently tried to cancel crammed charges that one third-party vendor 

placed on four different lines for electronic facsimile service, the third-party vendor 

claimed that the only people who could cancel the billing were the people who the 

vendor claimed had ordered the service on each individual line. Other third-party 

vendors have taken that same position in the past. This has left the hospital system 

employee uncertain what she can do to cancel the charges because the names of the 

people who the vendors claim ordered their services are not names of employees of 

the hospital system. The telephone companies that provide service to the hospital 

system have stated that they ‘‘have no control over’’ the charges that get crammed 

onto the hospital system’s landline telephone bills. 

The hospital system employee sometimes finds it impossible to contact the thirdparty vendors that place charges on its bills. And even when she succeeds in canceling an unauthorized third-party charge, she often cannot obtain full billing credits for past months’ charges. 

71 

24 Committee staff telephone interview with United States Postal Service employees (Apr. 4 

and 6, 2011); Committee staff telephone interview with United States Postal Service employees 

and telecommunications expense management company employee (May 12, 2011). Part of the 

information regarding the United States Postal Service’s experience with cramming comes from 

data and documents that the Postal Service provided the Commerce Committee on May 2 and 

May 12, 2011 in response to a letter that Chairman Rockefeller sent to United States Postmaster General and Chief Executive Officer Patrick R. Donahoe on April 13, 2011. 25 Committee staff telephone interview with United States Navy personnel (May 2, 2011). Part 

of the information regarding the United States Naval Computer and Telecommunications Station-San Diego’s (NCTS–SD) experience with cramming comes from data and documents that 

NCTS–SD provided the Commerce Committee on April 27 and 29, 2001 in response to a letter 

that Chairman Rockefeller sent to United States Navy RADM Tom Copeman on April 4, 2011. 

V. Federal Government 

United States Postal Service 24 Since late 2006, a telecommunications expense 

management company called ProfitLine has spent an estimated 1,500 hours identifying, canceling, and obtaining approximately $110,000 in billing credits for more 

than 2,900 charges that have been crammed on telephone bills for Postal Service 

locations throughout the country. If the Postal Service had incurred each of the unauthorized charges for 1 year without canceling them, the Postal Service would have 

paid almost $550,000 for the unauthorized charges. The crammed charges included 

charges for services such as voice-mail, e-mail, electronic facsimile, online backup, 

web hosting, tech support, search engine optimization, photo storage and printing, 

identity theft protection, diet plans, credit counseling, digital music, and video 

downloading. The third-party vendors that have crammed charges on the Postal 

Service’s telephone bills include defendants in past FTC and state law enforcement 

cases. The Postal Service’s telecommunications expense management company told Committee staff that the number of unauthorized third-party charges appearing on the 

Postal Service’s telephone bills is increasing rather than decreasing. The company 

sometimes succeeds in stopping particular third-party charges on one line and then 

sees the same charges appear the next month on other lines in the same Postal 

Service location. The telecommunications expense management company does not 

believe that any Postal Service employee used any of the services that the company 

identified as a crammed service. When the company has asked third-party vendors 

to state the names of the Postal Service employees who supposedly authorized particular third-party charges, the vendors have sometimes stated the names of famous 

people such as Janet Jackson. 

The Postal Service receives telephone service from dozens of different telephone 

companies. During the past 5 years, at least thirty different telephone companies 

have sent bills to the Postal Service that contained at least some crammed charges. 

Some of the Postal Service’s contracts with telephone companies state that thirdparty billing must be restricted from the Postal Service’s telephone bills. Notwithstanding that contractual provision, some telephone companies have told the Postal 

Service that they do not have the ability to block third-party charges from appearing 

on the Postal Service’s telephone bills. Other telephone companies have said that 

they will attempt to block the charges but are not able to block all of them. A Postal 

Service employee reported that Granite seems to be able to stop third-party charges 

from appearing on the telephone bills that the Postal Service receives from Granite. 

United States Navy-San Diego 25 Since 2007, the United States Naval Computer 

and Telecommunication Station in San Diego, California (‘‘NCTS–SD’’) has identified and canceled hundreds of crammed charges on the landline telephone bills it 

processes for the Navy in the San Diego region. NCTS–SD estimates that the bills 

it processes currently contain approximately $300–$600 worth of crammed charges 

per month. Those figures represent a decrease from previous years, including 2009, 

when the telephone bills contained approximately $11,000 worth of crammed 

charges in one quarter. The crammed charges have included charges for voice-mail 

and online backup services. 

Although NCTS–SD thinks it is possible that Navy employees may sometimes 

knowingly or inadvertently enroll their individual telephone extensions in thirdparty services, Navy employees whose individual extensions have incurred thirdparty charges often state that they have never heard of the services for which their 

lines are being charged. In addition, certain unauthorized third-party charges have 

sometimes appeared on consecutively-numbered telephone extensions which led 

Naval personnel to believe that those charges were fraudulent rather than the result of Naval employees enrolling their telephone numbers in third-party services. 

When NCTS–SD employees contact billing aggregators to dispute third-party 

charges, they request blocking of third-party charges on the particular telephone 

lines that incurred the disputed charges. Nevertheless, those same lines sometimes 

72 

26Letter from City of Tyler, Texas to Senator John D. Rockefeller IV (May 27, 2011); Committee staff telephone interview with City of Tyler employee (May 12, 2011); Letter from City 

of Tyler to Texas Public Utilities Commission (Mar. 9, 2009) (enclosing e-mail messages exchanged between City of Tyler and AT&T) (produced to Commerce Committee by daData, Inc. 

without Bates numbers). 27 Committee staff telephone interview with City of Los Angeles employees (May 26, 2011); 

E-mail message from AT&T to City of Los Angeles employees (Feb. 8, 2011). 

incur new third-party charges from different third-party merchants in subsequent 

months. AT&T has told NCTS–SD personnel that AT&T cannot block third-party 

charges from appearing on the Navy’s telephone lines. 

NCTS–SD believes that the third-party charges that have been billed to Naval 

central office trunk lines must be ‘‘100 percent fraud.’’ Naval personnel who use the 

Navy’s telephone services do not know the telephone numbers associated with the 

central office trunks. Those numbers are unpublished, and they never appear on 

caller identification records because they are not connection points for telephone 

calls. 

VI. State and Local Governments 

Tyler, Texas 26 The City of Tyler, Texas sent Chairman Rockefeller a letter regarding its experience with cramming on its landline telephone bills. The city discovered 

in February 2009 that it had been crammed by at least ten different vendors for 

as long as 26 months. 

In February 2009, a city employee e-mailed AT&T a list of the unauthorized 

charges and stated that she had ‘‘spent hours calling and getting cancellation confirmations and retroactive credits to the tune of $1,500.’’ An AT&T Senior Account 

Manager replied by stating that he realized that cramming was a problem but could 

not do anything to help the city deal with it. Specifically, the AT&T employee said: 

Neither myself or my team can do anything to resolve these for you and this 

isn’t the first time we’ve been asked. This is a common problem with big accounts with lots of employees. Everyone has to fight these. My former account 

Dallas County would have 20–30 per month and there is no easy way to resolve 

them except the way you are doing it. I wish, I really wish there was some way 

we could help but there is not. 

*** 

I checked on this and was not able to get any good ideas on how to resolve it. 

I would recommend calling the AT&T billing number to see if they could give 

you any info or even stop the billing on these two items. I wish I could have 

been some help but this is the best I could come up with. 

More than two years later, and after complaining to the Texas Public Utility Commission, the City of Tyler continues to identify crammed charges on its AT&T 

landline telephone bills. The city’s letter to Chairman Rockefeller states that ‘‘[t]he 

soft costs of man-hours within all levels of government wasted to identify, confront 

and track these transactions must be staggering!’’ The city employee who deals with 

cramming sometimes has to use Internet searches and make multiple calls to try 

to dispute some of the crammed charges because the city’s telephone bills do not 

always include telephone numbers for contacting some of the merchants that have 

placed unauthorized charges on the city’s telephone bills. For example, she recently 

had to use Internet searches to find contact information for a company that charged 

the city $99.95 for search engine optimization and a company that charged multiple 

city lines for directory assistance in multiple months. 

Los Angeles, California 27 The City of Los Angeles told Committee staff that it has 

consistently incurred crammed charges on its landline telephone bills for years. Approximately three years ago, an outside auditor helped the city identify and cancel 

the crammed charges that had been appearing on the city’s telephone bills. After 

the auditor completed its work, however, the city quickly began to incur new 

crammed charges. 

For example, in February 2011, the city determined that ten different third-party 

vendors had been cramming charges on a city library telephone bill for services such 

as voice-mail, electronic facsimile, and meal planning services for as long as 31 

months each. After the city sent a list of those unauthorized third-party charges to 

AT&T, AT&T provided the city more than $5,100 in billing credits. City employees 

told Committee staff that AT&T is responsive in removing and providing billing 

credits for crammed charges when they notify AT&T about such charges.JLW 

In February 2011, the city requested that AT&T block all its lines from thirdparty billing because the city had ‘‘been getting a lot of 3rd party billing lately.’’ 

73 

28 Committee staff telephone interviews with City of Chicago employees (May 25 and 26, 

2011); E-mail messages from AT&T to City of Chicago employees (June 10, and Aug. 11, 2010). 29Letter from Michigan Department of Licensing and Regulatory Affairs to Senator John D. 

Rockefeller IV (May 5, 2011). 

AT&T responded by telling the city that it could not block its lines from third-party 

billing. AT&T stated in an e-mail to the city: 

We are not able to do a ‘‘blanket’’ block including all carriers because we have 

to be un-biased and provide billing services for these companies. Besides there 

are new companies popping up all the time so it will still require some ongoing 

auditing by the City. 

However, I will be happy to help you with the unauthorized Third Party Billers 

blocking on a case by case basis. All that I need is the BTN [billing telephone 

number] and the unauthorized charge information such as the name of the service and the amount so that I can locate the charge on your bill. 

Once I receive your request, I can recourse the charges back to the carrier, report the incident, and request the blocking for future charges. I can continue 

following the same process that I did for [city employee’s name] by blocking all 

WTN’s [working telephone numbers] associated with each BTN reported. 

Chicago, Illinois 28 The City of Chicago told Committee staff that it continues to 

incur some crammed charges on its landline telephone bills despite its requests for 

AT&T to block all third-party charges. In July 2010, the city’s telecommunications 

manager e-mailed AT&T to state that the city’s July 2010 invoice contained the 

same unauthorized third-party charges that the city had disputed for the past year 

as well as new unauthorized third-party charges. 

An AT&T Business Solutions Customer Service Manager e-mailed the city in June 

2010 to state that AT&T’s ‘‘[s]lamming and [c]ramming protection is not 100 percent 

guaranteed to catch all third party billing,’’ ‘‘[u]nfortunately, from time to time a 

third party biller may slip through,’’ and ‘‘when it’s identified we will recourse the 

charges.’’ In August 2010, another AT&T manager e-mailed the city to explain that 

crammers were figuring out how to get around the blocks: 

After a review of some of the accounts, we determined that some Third Party 

Billing Service Providers are improperly using the Blocking Exception Indicator 

intended to bypass specified types of charges. This has resulted in inappropriate 

third-party charges being billed to AT&T End-User accounts subject to thirdparty bill blocking. A letter approved by legal is being sent to the Third Party 

Billing Service Providers strictly reinforcing the proper application of the bypass process to avoid sanctions by AT&T. AT&T is also pursuing other options 

to further protect the City of Chicago from receiving these charges and insure 

compliance by Third Party Service Providers. 

Michigan Department of Licensing and Regulatory Affairs 29 An employee from the 

Michigan Department of Licensing and Regulatory Affairs sent Chairman Rockefeller a letter stating that the department regularly incurred crammed charges on 

approximately six of its landline telephone invoices for voice-mail, electronic facsimile, tech support, and identity protection services between 2006 and 2010. The 

department initially paid the charges because department employees assumed they 

were correct. The department employee who audited all of the department’s landline 

telephone invoices later became suspicious when she noticed that many of the 

charges were for services that departmental employees already had available to 

them. The department was neither able to obtain refunds for all of the crammed 

charges nor able to get AT&T to block its lines from incurring additional crammed 

charges. 

The Michigan state employee’s letter to Chairman Rockefeller states: 

Upon determining that these ‘‘services’’ were not being ordered or received by 

any of our staff members, I began to systematically dispute the charges every 

time I encountered them. 

*** 

I quickly found that the third-party companies, or the companies they represented, rarely challenged my disputes. . . . Due to the fact that I never had 

any tangible proof that someone in one of our offices did not order the services, 

I was never able to get them to give me retroactive credits. The burden of proof 

seemed to be on our end instead of on the end of the third-party billers and 

the companies for which they billed. Since there had not been anyone in our 

department auditing and challenging these charges before me, they were usuVerDate Nov 24 2008 08:45 Dec 15, 2011 Jkt 071640 PO 00000 Frm 00077 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\71640.TXT SCOM1 PsN: JACKIE
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30Letter from County of Los Angeles Internal Services Department to Senator John D. Rockefeller IV (May 23, 2011); Committee staff telephone interview with County of Los Angeles employees (May 18, 2011) 31Memorandum from Orange County Executive Office to Commerce Committee Staff (June 

14, 2011). 32 Committee staff telephone interview with City of Houston employee (June 3, 2011); E-mail 

message from City of Houston employee to Commerce Committee staff (June 3, 2011). 33 Committee staff telephone interview with City of St. Louis employee (May 20, 2011); E-mail 

message from City of St. Louis employee to Commerce Committee staff (May 25, 2011). 

ally paid and [the department] was never reimbursed for any of these charges 

that occurred prior to my disputes. Throughout my time of handling these disputes, there was never a single time where one of the offices had to contact me 

because a needed service billed on their AT&T account by a third-party company had been disconnected. . . . I was never able to get AT&T to put blocks 

on our accounts to stop third-party charges, but I always asked the third-party 

billers in my disputes to block charges on their end from being charged on the 

line after the initial claim. They usually claimed to do so and I never saw a 

third-party charge on the same line again after a block was in place. 

Los Angeles County, California 30 Los Angeles County, California sent Chairman 

Rockefeller a letter explaining that, since November 2009, the county has received 

more than $306,000 in billing credits for past charges that had been crammed onto 

its AT&T landline telephone bills. County employees have spent more than 125 

hours dealing with cramming since November 2009. After the county implemented 

a new billing system that enables it to see greater detail on its landline telephone 

bills, the county discovered thousands of instances of cramming for services such as 

voice-mail, identity theft protection, privacy, and debt-related services. The county 

canceled all such services and requested that AT&T block third-party charges from 

appearing on its telephone bills. The county does not believe that county employees 

were using any of the services it canceled because no county employees have inquired about their loss of access to the services since the county canceled them. The 

county continues to incur some crammed charges on its landline telephone bills. 

Orange County, California 31 Orange County, California has battled cramming on 

its landline telephone bills since 2001. For some period of time, county employees 

spent ‘‘upwards of 60 labor hours a month’’ dealing with 100–300 instances of cramming, or approximately $3,000 worth of crammed charges, per month. Many or most 

of the crammed charges were for services that the county’s telephone systems already provided. The county’s routine practice was to contact AT&T to obtain contact 

information for the third-party vendors that had crammed charges onto its bills. In 

most instances, the county ended up refuting the charges via AT&T because the 

county was not able to contact the third-party vendors to request billing credit. In 

2008, after several months of negotiations, AT&T agreed to block third-party 

charges on the county’s telephone bills. Even with blocking in place, the county continues to incur a small number of crammed charges and spends approximately 5 

hours per month addressing those charges. 

Houston, Texas 32 The City of Houston, Texas currently identifies approximately 

ten crammed charges on its landline telephone bills each month for services such 

as photo storage, music download, and voice-mail services. In previous years, the 

city identified as many as fifty crammed charges per month. The city has incurred 

crammed charges on telephone numbers for facsimile lines and operations lines that 

are not published and are not assigned to individual employees. 

City of Houston employees review the city’s numerous individual bills each month 

and contact the billing aggregators to cancel and request billing credit for the unauthorized third-party charges they identify. They also send lists of the unauthorized 

third-party charges to AT&T to inform AT&T that the city will be deducting the cost 

of the unauthorized third-party charges when it pays its AT&T bills. Based on their 

communications with AT&T, city employees do not believe AT&T can block thirdparty charges from appearing on the city’s telephone lines. For example, an AT&T 

service representative e-mailed city employees in January 2009 to state that AT&T 

had provided the city $4,200 worth of billing credit for unauthorized third-party 

charges but stated: 

Just a reminder this will not STOP the charges in order to do that you will 

need to call the companies that are billing to do that, which you will need to 

do. All I am doing is sending the charges back to the companies that billed 

them saying that they were unauthorized. 

St. Louis, Missouri 33 Between October 2009 and February 2010, the City of St. 

Louis, Missouri identified approximately 360 instances of cramming on its landline 

75 

34 Committee staff telephone interview with Tulare County employee (June 3, 2011); E-mail 

message from Tulare County employee to Commerce Committee staff (June 3, 2011). 

telephone bills for services such as voice-mail, diet plans, electronic facsimile, celebrity tracking, and identity theft protection. 

An employee in the Controller’s Office became particularly suspicious about the 

legitimacy of the third-party charges when she noticed that some of the charges appeared on Controller’s Office lines. She then discovered numerous complaints on the 

Internet regarding the third-party vendors that had placed charges on the city’s 

telephone bills. She called some of the city employees whose lines were being 

charged for third-party services, and the employees told her that they had not heard 

of the services for which their lines were being charged. She believes that her subsequent request for AT&T to block the city’s lines from third-party charges has reduced the amount of cramming on the city’s telephone bills. 

Tulare County, California 34 In September 2009, an outside consultant helped 

Tulare County, California identify more than 60 charges that had been crammed on 

its landline telephone bills for services such as voice-mail, identity theft protection, 

and electronic facsimile services. Some of the charges had been recurring for more 

than 3 years. The county obtained approximately $11,000 in credits for the unauthorized charges. A county employee who worked on the issue believes that was 

‘‘only the tip of the iceberg’’ with respect to the county’s experience with cramming. 

Appendix B 


713APPB1.eps
76 


713APPB2.eps 713APPB3.eps
77 


713APPB4.eps 713APPB5.eps
78 

Appendix C 


713APPC1.eps 713APPC2.eps
79 

Appendix D 


713APPC3.eps 713APPD1.eps
80 

The CHAIRMAN. Although Congress and the telephone companies 

haven’t been doing enough to protect consumers from cramming— 

our fault—I’m glad to say that some State and Federal law enforcement agencies have stayed on the job. We’re going to hear from the 

Attorney General of Illinois, Lisa Madigan, who sits right there. 

And she’s going to tell us how her office has filed more than 30 

lawsuits against crammers. 

And we’re going to hear about a law that the State of Vermont 

passed recently to protect its citizens against cramming. A lot of 

other law enforcement authorities, including the Federal Trade 

Commission, the Federal Communications Commission, have filed 

lawsuits and shut down crammers. 

But what they need to know is that crammers can come right 

back. They’re ubiquitous. They’re everywhere. Like all those little 

satellite alien space things. They just drift around, waiting to plop 

down onto a phone bill. But as we’re going to hear today—and I’m 

sorry so long—when they shut down one crammer, new crammers 

appear to take their place. 

So it’s obvious at this point that voluntary guidelines are not 

going to solve this problem. It’s also pretty clear that the case-bycase law enforcement approach is not going to work. There are just 

too many crammers out there, ripping off too many consumers. So 

it’s time for us, I think, to do something more about it. 

Say one more thing, there are about 300 million charges, mostly 

unauthorized, entered onto telephone bills each year, 300 million. 

And that’s about—worth about $2 billion, you know. So that’s not 

a lot of money, except if you have to pay it. People living on the 

edge—1995, that’s a lot of money. And again, all $2 billion were not 

cramming charges, but most of them are. We estimate there have been about $10 billion worth of thirdparty charges on consumer telephone bills. We estimate that 

AT&T, and Qwest, and Verizon, have earned more than $650 million, those three companies, from this themselves. That’s pretty big 

money. That’s pretty big money. 

And so anyway, we’ve got a real problem here, and we’re—we 

want to do the right thing, and we want to protect people, and 

that’s the end of me, so I call on Senator Ayotte. 

STATEMENT OF HON. KELLY AYOTTE, 

U.S. SENATOR FROM NEW HAMPSHIRE 

Senator AYOTTE. Thank you, Mr. Chairman. I want to thank you 

for holding this important hearing. I know that you and your staff 

have put a great deal of time and effort in preparing the investigative report that the Committee released today. I also want to thank 

those at the Federal and State levels who have pursued enforcement actions against those perpetrating this fraud on consumers. 

I especially want to recognize my former colleague, Lisa Madigan, the Attorney General of Illinois, with whom I worked with 

when I was the Attorney General of New Hampshire. She has been 

very active in this field, and I welcome her here this morning. 

For more than a decade, New Hampshire has actually had a 

framework for responding to the practice commonly known as 

cramming. When I served as the State’s top law enforcement officer, I oversaw an active consumer protection bureau, as General 

81 

Madigan does, which included the publication of consumer protection sourcebook and brochures to provide individuals with information about how to protect against cramming. 

Additionally, in New Hampshire, the Public Utilities Commission 

is also authorized to sign billing aggregators that were service providers found to be cramming or to ban them entirely from access 

to the telephone company billing apparatus to prevent further 

harm to consumers. As we continue to examine this issue and discuss how to best address it, we must not lose sight of the fact that 

cramming affects regular, hard-working Americans who are being 

scammed out of their hard-earned dollars. 

As a former prosecutor, it’s my intent to bring to justice the bad 

actors, but simultaneously, also recognize that there are legitimate 

businesses providing services to consumers. It is my hope that we 

will spend some time this morning talking about the prosecution of 

crammers, and how to best go after those defrauding the consumer. 

Without strict deterrence or fear of retribution for those scamming 

the public, we are certainly not adequately addressing this issue. 

In addition to the witnesses from Illinois and the Vermont law 

enforcement, who we will hear from today—and I appreciate Mr. 

Burg being here as well—we should note that the FTC and the 

FCC also play a key role in fighting cramming by bringing law enforcement actions against bad actors regarding illegitimate charges 

on consumers’ phone bills. Just yesterday, the FCC announced a 

notice for proposed rulemaking, which is intended to help consumers detect and prevent unauthorized charges. So there is ongoing action to help consumers protect themselves. 

However, one of the issues I hope this committee will be addressing is whether those steps are sufficient to protect consumers and 

hold wrongdoers accountable. Given the clear importance of this 

issue and the urgent need to find workable solutions that protect 

the public, I very much appreciate the work that went into this 

year-long investigation. 

I am disappointed that the findings were only released right before the hearing because I would have liked to have heard from our 

witnesses more of an analysis of what his or her view is of the report. So going forward, I hope that all of you will feel free to augment the record with your perspective on the year-long investigation that was conducted by this committee. 

I appreciate each of the witnesses for sharing his or her expertise 

and for helping the Committee better understand this important 

issue affecting so many Americans. 

And as a follow up to this hearing, I also believe it is necessary 

that we do hear directly from local exchange carriers, aggregators, 

as well as the Department of Justice, FTC, and FCC, who have 

been prosecuting and imposing fines on those who conduct cramming. These additional perspectives on this report would provide 

insightful information as we address this very important issue on 

behalf of consumers. 

I look forward to the hearing today and I want to thank each of 

you for being here. I yield back the balance of my time. Thank you. 

The CHAIRMAN. Thank you very much, Senator. Shall we be kind, 

because we have Amy Klobuchar here? She has another hearing 

82 

she has to go to and Amy might like to say something, so, then, 

that leaves Mark Begich. And so we have to figure out—— 

STATEMENT OF HON. MARK BEGICH, 

U.S. SENATOR FROM ALASKA 

Senator BEGICH. I’ll pass. I’ll pass, allowing Senator Klobuchar 

to have as much opportunity as she desires. 

The CHAIRMAN. What a gentleman. Senator Klobuchar? 

STATEMENT OF HON. AMY KLOBUCHAR, 

U.S. SENATOR FROM MINNESOTA 

Senator KLOBUCHAR. Thank you very much. Well, thank you, Mr. 

Chairman, and I would concur in what Senator Ayotte talked about 

with the leadership of you and your staff in this area. It has been 

very helpful. And in fact, our State’s been taking this on, as Attorney General Madigan knows, not just at the federal level, but also 

at the State level with Attorney General Swanson. And last January, she and I joined together and talked about the filing of a consumer fraud lawsuit against a company that fraudulently charged 

thousands of Minnesotans for a service that they neither authorized nor used. 

The company, which was called Cheap to Dial, had charged 2,567 

consumers in Minnesota for long-distance service fees. And do you 

know how many people actually used that service, Mr. Chairman? 

Nine people, nine people of the 2,567 that were charged. 

And it’s just one example of an industry practice that has cost 

consumers and businesses millions, if not billions, of dollars. I’ll 

never forget the consumers that were standing there with us, and 

they were—I think one was a—they were a Lutheran minister and 

his wife. And of course, she had checked the bill, every tiny detail, 

and was able to discover that charge, which is not something I 

would do. 

And so it is very hard for consumers to notice these charges because so often, they can be $10, $15, $20, $5, amounts that they 

would not normally notice on a larger bill. 

And that’s why, when you add it up, it becomes a big chunk of 

change. So I am one that believes that it shouldn’t be up to the 

consumer to play detective, going over their phone bills with a 

magnifying glass every month. 

I believe that phone companies and third-party aggregators need 

to crack down on crooks who are stealing from our citizens and our 

businesses. We need clear rules of the road that prevent this behavior. There have been good things about our deregulated market. 

It has led to innovation. 

But there are also issues that we are seeing, like this one, where 

crammers have been exploiting this open market. So I applaud the 

commission for the rulemaking. I look forward to helping in any 

way I can. I look forward to hearing the testimony. 

I’m sharing a hearing in Judiciary on the Violence Against 

Women Act, which I know the Chairman cares about very much. 

That’s why I may not be here for all the questioning, but if I’m not, 

I will submit my questions on the record. Thank you. 

83 

The CHAIRMAN. Thank you much, Senator Klobuchar. My Vice 

Chairman, Senator Ayotte, is now going to make the next introduction. 

Senator AYOTTE. Thank you, Mr. Chairman. It is my privilege to 

introduce the Attorney General from Illinois, Lisa Madigan, who 

will provide testimony today, who has been very, very active on 

going after crammers in her own State. And again, I’ve had the 

privilege of serving with her as Attorney General, so I know how 

diligent she is in protecting consumers. So thank you, Attorney 

General Madigan. 

STATEMENT OF LISA MADIGAN, 

ATTORNEY GENERAL, ILLINOIS 

Ms. MADIGAN. Thank you, Senator Ayotte, Mr. Chairman, and 

distinguished members of the Committee. I appreciate this opportunity to testify. Today, I want to stress three points that draw on 

my eight and a half years’ experience, investigating and bringing 

enforcement actions against phone bill crammers, as the Attorney 

General of the State of Illinois. 

Number one, most consumers are completely unaware that their 

phone number can be charged almost like a credit card, so many 

consumers will never discover that there are unauthorized charges 

buried in their phone bill. 

Number two, my office has yet to see a legitimate third-party 

charge placed on a consumer’s phone bill. 

Three, phone bill cramming is such a persistent and pervasive 

problem, I believe that the only effective solution is to enact legislation banning third-party charges on phone bills. 

To give you an overview, Illinois individuals, businesses, churches, and government agencies have been filing complaints with the 

attorney general’s office about phone cramming since 1996. In response, Illinois, as well as other states, and the FTC have taken 

a series of law enforcement actions. And when we did that initially, 

it did temporarily quell the problem. 

However, we’re seeing a very strong resurgence in the number of 

cramming complaints. Initially, the phone bill cramming scams 

that we saw were perpetrated primarily through telemarketers, especially in the years prior to the establishment of the National Do 

Not Call Registry. Recently, however, crammers, like many other 

illegitimate scams, have moved to the Internet. 

Some Internet victims tell us that they have done nothing more 

than submit their name, their address, and importantly, their 

phone number in response to online offers for either a prize drawing, coupons, or free recipes. Eventually, of course, they learn that 

they have been crammed. Again, they did not know that they were 

buying anything at the time. And they did not know that, by giving 

their phone number, they were authorizing a charge on their phone 

bill. And so they’re understandably puzzled, and quite frankly angered, when sometime later, they notice that their phone bill contains a charge for a product or a service that they didn’t seek out, 

they didn’t authorize paying for, and very importantly, they never 

used. 

That’s when some of the victims turn to my office for help. However, FTC data indicates that as few as 1 in 20 consumers that are 

84 

billed for third-party charges on their phone bills are even aware 

of the billing. My own investigations have revealed a similarly low 

level of consumer awareness. 

In fact, throughout our investigations, we have learned that 

many victims have never visited the website of the vendor whose 

product or service they’re being charged for. And worse, some of the 

victims don’t even have access to the Internet. 

Additionally, victims consistently tell us that they have never 

used the product or the service for which they were billed. Again, 

that is not a surprise when consumers never even knew they purchased anything in the first place. 

For example, one case that my office handled—we managed to 

obtain the data on the more than 3,500 Illinois consumers who had 

been billed for Internet service and extended cell phone warranties. 

Most of the consumers we talked to did not know that they were 

being billed and none, none, of the 3,500 consumers had made a 

warranty claim or had used the Internet service. Our investigations 

consistently revealed that most phone crammers rely on deception. 

However, others engage in outright fraud. For scams involving 

deception, the basic marketing strategy has remained the same 

throughout the years. Whether over the phone or on the Internet, 

the consumers is never clearly told they’re making a purchasing decision, or that they’ll be billed for the purchase on their phone bill, 

or that giving their phone number will authorize a charge on their 

landline phone bill. 

In contrast with the scams involving deception, in which the victim participates in the transaction, albeit unwittingly, scams involving outright fraud don’t require the victim to take any action 

whatsoever. This type of cramming is also referred to as phantom 

billing, where the purported consumer acceptance of the vendor’s 

offers is completely falsified. 

In a number of the telemarketing cases we’ve investigated, we’ve 

obtained the recorded phone conversations of consumers purportedly agreeing to an offer. The only problem is that the voices on 

those recordings are not the voices of the consumers who were 

billed. And while I’m on the subject of phantom billing, I should 

note that in another of our cases, a county coroner’s office, a Steak 

’n Shake restaurant, and my personal favorite, the public library’s 

Dial-a-Story phone line, were among the 9,800 Illinois businesses 

billed for credit repair services, that even assuming credit repair 

services were legitimate, could only be used by an individual, obviously not by a business. 

So I would argue to this committee that when an automated children’s Dial-a-story phone line supposedly signs up for credit repair 

services, it is time to stop third-party billing. The bottom line is 

that, from the beginning, third-party charges on phone bills have 

been an open invitation to fraud and deceit. It has been a scam 

where vendors, billing aggregators, and carriers make significant 

money by consumers never noticing the cram charges on their 

phone bills. 

I strongly support decisive legislative action on the state and federal level to ban the practice altogether. Again, I thank you for the 

opportunity to testify today and I’m happy to answer any questions 

you may have. 

85 

[The prepared statement of Ms. Madigan follows:] 

PREPARED STATEMENT OF LISA MADIGAN, ATTORNEY GENERAL, ILLINOIS

Thank you, Senator Rockefeller and distinguished members of the Committee. I 

appreciate the opportunity to testify today. 

Telephone bill cramming first emerged as a consumer problem in the 1990s, and 

continues to be a problem today. Based on my eight and a half years of investigating 

phone bill cramming in my capacity as Illinois Attorney General, I can safely say 

that most consumers do not expect that their telephone account can be used to bill 

for services and charges unrelated to their telephone service, and that their telephone number is their account number. Furthermore, the vast majority of consumers who are billed never use the products and services, and in many cases are 

unaware they are being charged. 

Background on Telephone Bill Cramming Consumer Complaints 

My Office’s Consumer Fraud Bureau began receiving consumer complaints about 

unauthorized charges appearing on consumers’ telephone bills in 1996. In the early 

years of the problem, we saw monthly charges ranging from $9.95 to as much as 

$45.00 for products such as prepaid calling cards, voice mail service, credit repair 

services, a cell phone warranty, or a toll-free number (purportedly to provide free 

long distance service). Some services involved set-up fees of anywhere from $9.95 

to $25 in addition to the monthly fees. 

At first, phone bill cramming affected primarily residential telephone customers. 

Then unauthorized charges began appearing on the phone bills of small business, 

government, churches, and other non-profit entities in amounts ranging from $19.99 

to $49.95 for items such as website design and hosting, search engine optimization, 

or online yellow pages listings. 

These practices continue to evolve. In recent years, particularly since the creation 

of the National Do Not Call Registry in 2003, which has reduced telemarketing calls 

to residential phone numbers, we’ve seen an increase in complaints from consumers 

who were solicited online, as companies move to a new medium. As explained more 

fully below, online solicitations present a new set of challenges in our investigations 

of these cases. 

Even as telephone bill crammers have shifted their focus from telemarketing to 

the Internet, the stories we hear from consumers have remained remarkably similar. Complaining consumers consistently deny all knowledge of the charges and 

products or services. In fact, they tell my Office that they have never even used the 

products or services. When a consumer files a phone bill cramming complaint with 

my Office, our Consumer Fraud Bureau sends copies of consumer complaints to the 

two main entities involved—known as the vendor, or the company selling the service, and the billing aggregator—and requests a response. In many instances, the entity that responds claims to have obtained authorization from the consumer for the 

charges, but will agree, as a gesture of good will, to remove the charges from the 

consumer’s telephone bill and cease charging the consumer for the services. 

Many consumers have reported to my Office that they experienced difficulty when 

they tried to remove the charges on their own—that they spent hours on hold or 

were given the runaround when they attempted to obtain refunds for amounts already paid. 

My investigations of vendors, which include obtaining information about the vendors from their billing aggregators, have routinely revealed deceptive sales pitches 

and high refund rates. 

The bottom line is that most consumers who are currently being billed for third 

party charges on their phone bills are unaware they are being billed. If they do become aware, they cancel the service and attempt to obtain a refund, because they 

never intended to purchase the product or service, and they never used it. Some consumers discover the charges in the first few months, but some cramming charges 

can go undiscovered for over a year or two. Some consumers never notice these 

charges on their phone bills. This is due in part to the relatively small amount of 

the charges compared with the total phone bill amount, and the complexity of phone 

bills. 

Mechanics of Third Party Billing 

Vendors are the parties whose charges appear on consumers’ telephone bills. They 

solicit telephone subscribers to buy their products or services, and then transmit 

their list of acquired customers to billing aggregators for further processing. The 

only piece of information that is needed is the consumer’s telephone number. 

86 

Billing aggregators are the entities that act as the intermediary between vendors 

and consumers’ local telephone companies. The billing aggregators enter into contracts with vendors to pass on their charges to consumers’ telephone companies. The 

aggregators in turn have contracts with the numerous local telephone companies nationwide to place the vendors’ charges on consumers’ telephone bills. 

The local telephone company collects the charges from the consumer, retains its 

portion of the charges, and remits the remaining portion to the billing aggregator, 

who retains its portion of the charges and remits the vendor’s share to the vendor. 

Both the aggregator and the local telephone company screen potential vendors before allowing them onto the billing platform. 

My office’s investigations of crammed phone bill charges reveal that both entities 

could be doing more to screen out problematic vendors, including taking a closer 

look at who is behind applications for access to the billing platform and more closely 

scrutinizing marketing materials and marketing methods, both proposed and implemented. 

Products Billed on Landline Telephone Bills 

The products have changed over the years, but they continue to be unwanted, unused, and often unnecessary. Early cramming complaints involved voice mail service, Internet service, search engine optimization, long distance calling cards, toll-free 

telephone numbers (purportedly used to obtain free long distance service), local singles matching services, and Web page design. More recently, we have seen cramming complaints about phone billed charges for credit repair, identity theft prevention and monitoring, business advice on how to start an online business, online 

photo storage, roadside assistance, online yellow pages listings, Internet service, email service, and travel and restaurant discounts. 

Some of these services are duplicative of services that consumers already have, 

so it stands to reason that the consumers would not have approved purchasing these 

duplicative services. Other services are available for free from other sources, such 

as photo storage and e-mail services. In any event, both my investigations and FCC 

data support findings of extremely low usage rates for these products and services. 

These low usage rates, less than 1 percent, indicate that consumers did not knowingly sign up for them. 

Marketing Methods 

Telemarketing and Third Party Verification 

Initially, vendors marketed their services via cold telemarketing calls to a residential consumer’s telephone number. Telemarketing solicitations to residential consumers have decreased since the National Do Not Call Registry was created, but 

telemarketing solicitations to small businesses continue because telemarketing calls 

to businesses are not covered by the National Do Not Call Registry. 

These telemarketing pitches often are deceptive. Examples of deceptive telemarketing solicitations I have seen include misrepresentations in which consumers 

are told that: 

• They are only agreeing to a free trial or to receive written materials about an 

offer, and that if they want to buy something, they must take some affirmative 

steps to make the purchase. In fact, however, if the consumers agree to the free 

trial or to receive materials, they are billed, even though they take no further 

steps; and 

• The purpose of the call is to renew a small business consumer’s current yellow 

pages listing, when in fact the vendor has no current business relationship with 

the small business consumer. This misrepresentation sometimes is coupled with 

a misrepresentation that the listing is free, and that the caller just needs to 

verify the business’ information to include in the listing. 

In some cases, in response to inquiries from my Office about telemarketing sales 

resulting in phone bill cramming, vendors have produced purported proof of authorization from consumers. This purported proof is referred to as a third party 

verification tape. Third party verification is a process in which a third party, supposedly unrelated to the vendor or telemarketer, joins the telemarketing call and 

asks a series of questions of the consumer to confirm that she agreed to the vendor’s 

offer. This verification conversation is recorded and preserved for at least two years 

in order to respond to potential cramming complaints. 

The fundamental problem with these verification tapes is that the recorded conversation takes place after the initial telemarketing call, which is unrecorded. Thus, 

at the point of the supposed verification, the consumer has already heard a deceptive telemarketing sales pitch and, as a result of the deception, has agreed to the 

free trial or to receive materials, or otherwise is under the impression that he has 

87 

not made a purchasing decision. The telemarketer often describes the verification 

process as a mere formality and instructs the consumer to answer yes to the questions posed. 

At best, verification recordings involve a recording of a person saying yes or no 

to a few questions taken out of context following an unrecorded sales call in which 

the consumer was led to believe that no purchasing decision was being made, or 

that a current contract was being renewed. At worst, such recordings are falsified, 

and the voice on the recording is not that of the telephone subscriber. 

Among falsified recordings, we have seen instances where someone is posing as 

the telephone subscriber in order to fabricate a sale. In other cases, the vendor will 

claim to have obtained authorization from a non-existent employee of a small business. Some residential consumers have listened to the purported verification tape 

and reported that the voice on the tape is not theirs. 

In one case I brought, the vendor had billed over 9,800 Illinois consumers for credit repair services. Although the credit repair services were designed for individuals, 

the billed consumers include a county coroner’s office, a Steak N Shake restaurant, 

and public library dial-a-story telephone line. 

In another recent case, the materials that the billing aggregator produced to my 

Office indicate the vendor was billing for a service that was different from the description that appeared on consumers’ telephone bills. Consumers’ phone bills indicated they were being charged for some sort of Internet service. However, the actual 

product, according to the vendor, was both a cell phone warranty and Internet services, with more emphasis on the cell phone warranty. 

In that case, we requested usage information from the vendor. The vendor indicated that none of the more than 3,600 Illinois consumers who were billed for that 

service had contacted the vendor to activate Internet service or request repair or 

replacement of their cell phone, thus confirming that Illinois consumers, small business, churches, and government offices were unaware they had purchased anything. 

Letters of Agency and Live Check Solicitations 

For a short time several years ago, some vendors would claim they had obtained 

authorization via a toll-free telephone number that consumers allegedly had dialed 

in order to request the services. However, no billed consumers who complained to 

my Office about those charges recalled having made such a request. 

Another early marketing method was a Letter of Agency, or LOA. In some cases, 

LOAs were sweepstakes entry forms that served a dual purpose of entering a sweepstakes to win a prize and authorizing the vendor to charge the consumer a monthly 

charge for a product or service on his or her telephone bill. The form prompted consumers to provide their name, address, and telephone number. In many cases, upon 

seeing the LOA that the vendor relied on as authorization for the product or service 

to be billed, the consumer claimed that his or her signature had been forged. 

In the last few years, we also have seen live check solicitations. Live check solicitations typically are sent to small businesses. The solicitations are actual checks for 

nominal amounts that also serve as a solicitation. Endorsing and cashing the check 

constitute acceptance of the vendor’s offer, which involves being billed for a product 

or service on your telephone bill. This marketing method is particularly insidious, 

as small businesses often process numerous checks in the course of a day and would 

have no reasonable way to identify checks that are also solicitations. 

My Office, as part of a multistate investigation with my colleagues in other states, 

sued a company that sold online business directory listings via live check solicitations. That company ultimately settled with the states and agreed to cease using 

live check solicitations. Almost immediately thereafter, the same company began offering the same online business directory listings via deceptive telemarketing solicitations. In this particular scheme, the telemarketer would falsely imply that the 

business was a current customer and was only being asked to renew its online yellow pages listing, so I sued the company a second time. 

Online ‘‘Solicitations’’ 

In recent years, vendors have moved to online solicitations. When a consumer 

complains about unauthorized telephone bill charges for items such as credit repair 

services, cell phone warranties, or ID theft protection services, for example, the vendor claims to have obtained authorization from the consumer online. In some cases, 

the proof the vendor provides my Office that the consumer authorized the charges 

is personal information about the consumer, such as telephone number, date of 

birth, address, e-mail address, or IP address. This information is displayed in what 

appears to be a simple sign-up form. 

However, we believe the sign-up forms typically provided to us as so-called proof 

of authorization are not the actual forms that consumers complete to authorize the 

88 

purchase. Instead, the simple sign-up form we receive appears to have been populated with information obtained from an online sign-up process known as ‘‘co-registration.’’ In this process, a consumer believes he is registering to receive something 

for free, such as coupons, or too win a prize, such as a television or DVD player. 

But in fact, by providing the requested personal information, the consumer is also 

‘‘agreeing’’—unwittingly—to purchase a service to be billed on his telephone bill. 

At some point between online sign-up and the provision of the so-called proof of 

authorization, the registration information is submitted for billing on the consumer’s 

phone bill and is populated into a different sign-up form. In many cases, this second 

document is the only sign-up form provided to my Office. Consequently, we are often 

unable to inspect the online solicitation to see whether the key terms of the offer 

are disclosed clearly, if at all. 

In other cases, the billed telephone number does not correspond to the name and 

address of the person to whom that telephone number is assigned. 

Deceptive Online Marketing and Fraud 

Some phone bill crammers rely on deceptive marketing to lure unsuspecting consumers, while others engage in outright fraud. In many of our cases involving deceptive marketing, the billed consumer may have provided his or her contact information online for the purpose of entering a prize drawing or obtaining coupons, as described above. In some of our cases involving fraud, it appears that someone, either 

the vendor or a third-party marketer that contracted with the vendor, simply entered names and telephone numbers (perhaps gleaned from the phone book or a 

public records service) into online sign-up portals or otherwise submitted falsified 

orders for processing. This is what is known as phantom billing, and it possibly explains why some consumers are billed even though they insist they have never used 

the Internet. 

Recent investigations have provided us very little in the way of online marketing 

materials because billing aggregators tend to collect very little marketing information from their vendors. When vendors ask a billing aggregator to provide telephone 

bill access for the vendor’s service, the aggregator requests the vendor’s marketing 

materials in order to vet the vendor. However, instead of providing the actual landing and sign-up page, the vendor simply provides its own website, which tells the 

aggregator very little about its marketing methods. Based on what we’ve seen in 

our investigations, very few consumers actually go to the vendor’s website to sign 

up for the vendor’s services. Also, vendors often do not market their own services 

but instead contract out their marketing to third parties, who sometimes in turn 

contract it out to fourth parties. These third and fourth parties are part of the shadow world of affiliate marketers. 

In many cases, the marketing materials used by these third and fourth parties 

are not provided to the billing aggregator, and the vendor disclaims any knowledge 

about the identity of the marketer and the appearance of these solicitations. One 

vendor indicated that at a certain point, it began to suspect fraud by one of its marketers when it noticed higher than expected customer service call volumes, implying 

that the customer complaint calls, as opposed to a careful review of the marketing 

materials, were the first sign of trouble. 

Based on the responses to subpoenas from my Office and responses to consumer 

complaints, it appears that both the vendor and the billing aggregator commonly accept orders from these third and fourth party marketers without inquiry into whether appropriate solicitations were used to obtain the orders. 

Past Approaches to Reducing Telephone Bill Cramming 

My Office has filed 30 law enforcement actions in response to telephone bill cramming. These are in addition to the law enforcement efforts of numerous other state 

attorneys general and Public Utilities Commissions, and the Federal Trade Commission. These actions often result in the vendor shutting down and ceasing soliciting 

and billing for unwanted products and services. However, other vendors with the 

same deceptive and fraudulent business practices quickly appear in their place. 

In response to the law enforcement and regulator scrutiny that followed the first 

wave of phone bill cramming complaints in the late 1990s, the aggregator industry 

implemented a set of ‘‘Best Practices’’ that called for participating industry members 

to follow certain steps before approving vendors for billing, and when handling consumer complaints received after the fact. At first, these responses seemed to reduce 

incidents of cramming. However, consumer complaints about phone bill cramming 

began to increase about three or 4 years ago, and our phone bill cramming investigations continue to indicate that consumers are not aware they are being billed 

for these products and services on their phone bills, and do not want or use the 

products or services. 

89 

Ban Third Party Telephone Billing 

Simply put, these deceptive and sometimes fraudulent solicitations for products 

that no one wants or agreed to buy have persisted for at least 15 years and show 

no signs of disappearing. With a few exceptions for some regulated services, such 

as operator-assisted calls, it is time to put an end to third party billing on telephone 

bills by banning them at the state and/or Federal level. 

Again, I thank you for the opportunity to testify today, and I am glad to answer 

any questions you may have. 

The CHAIRMAN. Thank you very much, Attorney General Madigan. And now, we turn to Attorney General Burg. 

Mr. BURG. No, it’s actually Assistant Attorney General Burg, but 

I appreciate the—— 

The CHAIRMAN. We’ll put you up for—— 

Mr. BURG.—promotion. 

The CHAIRMAN. Yes. 

Mr. BURG. OK. But Senator—— 

The CHAIRMAN. your work up there, and that’s what we’d like to 

hear about it. 

STATEMENT OF ELLIOT BURG, SENIOR ASSISTANT ATTORNEY 

GENERAL, OFFICE OF THE ATTORNEY GENERAL, STATE OF 

VERMONT 

Mr. BURG. I very much appreciate the opportunity to testify to 

the Committee today. Over the past year and a half, our office has 

been issuing subpoenas to third-party billing aggregators, to vendors. 

We have been surveying consumers, and interviewing consumers, 

and we’ve reached a number of conclusions about the problem of 

cramming, which I’d like to share with you today. And then I’d like 

to talk about a potential solution to the problem that has been embraced in Vermont. 

First of all, the incidence of cramming in Vermont is extremely 

high. Close to 90 percent of the people who responded to a survey 

had absolutely no recollection of ever having given consent to be 

billed on their local phone bill. 

Second, the level of consumer awareness about the possibility 

that one can be billed for third-party charges on a local phone bill 

is extremely low. 

Third, we have found many instances of deception being used in 

marketing third-party charges, that then get passed on to a local 

phone bill. 

And fourth—and this is really the major point that I want to 

make and it has to do with consumer expectations—people, ordinary people, do not expect that third-party charges by companies 

that are unrelated to their local phone company can be placed on 

their local phone bill. They are simply not aware of that, any more 

than people would expect, or any of us would expect, to have thirdparty charges placed on our monthly mortgage account statements 

or our electric bill. 

And without that awareness, people are not going to play the detective that we heard about. They’re not going to scrutinize their 

phone bill to try to figure out, is there something on there that 

they should be complaining about. 

Now, Vermont has given the potential solution of disclosure a 

fair shake. For the past decade, there has been a statutory requireVerDate Nov 24 2008 08:45 Dec 15, 2011 Jkt 071640 PO 00000 Frm 00093 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\71640.TXT SCOM1 PsN: JACKIE
90 

1What are sold in this way are almost always services, rather than goods. 

ment in Vermont that third-party vendors send a notice through 

the mail to people who are going to be billed on their local phone 

bills by that vendor. And the fact is that, that system has not 

worked. And the level of awareness of the possibility of those 

charges has not increased in the state. 

So what have we done by way of potential solution? In January, 

the Attorney General’s office proposed to the Vermont legislature 

that a bill they introduced that would actually prohibit third-party 

charges on local phone bills, with some limited exceptions for 

things like direct dial, or dial-around services that are initiated by 

the consumer from the consumer’s phone, or operator-assisted, or 

collect calls, or companies that are directly regulated by our public 

utilities board. The proposal was otherwise to ban such charges 

and a bill was introduced to do that. It was approved by voice vote 

in both houses of our legislature. It was signed into law at the end 

of May and became effective immediately. 

And under that law, a claim by a vendor that the consumer 

somehow consented to the charge is not a basis for allowing the 

charge. This is an actual prohibition. Other forms of payment are 

allowed, so vendors who want to charge people using a credit card, 

a debit card, electronic funds transfer, a check, the kinds of payment mechanisms that people understand and expect, that is all 

permissible. But you can’t do it on a phone bill. 

Since May, there has been no negative feedback whatsoever 

about the bill. We think people are pretty happy with it, and I 

would point out that the local phone companies supported us in 

that initiative in the legislature, that we approached them last fall, 

and made—basically made the pitch to them that these are their 

customers as well, and they came on board. 

So with that coalition, we were able to get that legislation 

through and I would very modestly suggest that this may be a 

model for other states and for the nation. Thank you. 

[The prepared statement of Mr. Burg follows:] 

PREPARED STATEMENT OF ELLIOT BURG, SENIOR ASSISTANT ATTORNEY GENERAL, 

OFFICE OF THE ATTORNEY GENERAL, STATE OF VERMONT

My name is Elliot Burg. I am a Senior Assistant Attorney General in the Vermont 

Attorney General’s Office, where I have worked on issues of consumer protection 

since 1987. I very much appreciate the opportunity to testify today on the subject 

of cramming, on behalf of Vermont Attorney General William H Sorrell. 

Since the spring of 2010, I have overseen a multi-pronged investigation into 

‘‘cramming’’ in Vermont—that is, the practice of charging consumers and businesses 

on their local telephone bills for third-party services 1 without their authorization or 

knowledge. Based on the results of that investigation, which is still ongoing, some 

important observations can be made about the nature and scope of the problem of 

cramming. In addition, out of the investigation has come a state legislative proposal, 

enacted into law earlier this year, which represents a potential solution to the problem. 

The investigation 

In the spring of 2010, the Vermont Attorney General’s Office sent a Civil Investigative Subpoena under the state’s Consumer Fraud Act, 9 V.S.A. § 2460, to the 

first of what would ultimately be four billing aggregators—the companies that arrange for the placement of charges on local telephone bills to pay for third-party 

91 

2 Information and documents produced in response to such a subpoena are deemed confidential under 9 V.S.A. § 2460. As a result, this testimony details only facts obtained from other 

sources or otherwise made public, such as through formal settlements. 3 Under the Vermont Consumer Fraud Act, the term ‘‘consumer’’ in most situations includes 

businesses. 4The notice requirement, enacted in the year 2000 and now substantially amended (as discussed below), was set out in 9 V.S.A. § 2466. That section required merchants to send the notice, but held both merchants and aggregators liable if that did not occur. 5 A total of 234 (41.6 percent) responding consumers indicated on the survey that they noticed 

a third-party charge on their local telephone bill. It was then possible to identify the billing 

records of 205 of these consumers; and of that number, 135 (65.9 percent) were charged for 

fewer than 4 months. The resulting percentage of consumers who noticed the charge, but only 

within the first 3 months, was 41.6 percent x 65.9 percent, or 27.4 percent. 

services.2 Based on complaints filed by consumers with the state, there was reason 

to believe that the sellers of those services (called ‘‘merchants’’ here) had violated 

the Act by charging consumers 3 without their authorization. There was also reason 

to believe that neither the vendors nor the aggregators were complying with a 

Vermont statute enacted in the year 2000 that sought to address the problem of 

cramming by requiring notice to consumers 4 of billing in the form of a letter containing specified information about the charges, any right to cancel, and contact information for the Attorney General’s Office. 

The aggregators were asked by subpoena to identify merchants for whom they 

had arranged for charges to appear on local telephone bills in Vermont. The Attorney General’s Office then subpoenaed the merchants with the highest total of dollars billed, for detailed information on their Vermont ‘‘customers,’’ their methods of 

doing business, and their marketing materials, including web pages and telephonic 

scripts. Surveys were mailed to a number of the customers, asking, among other 

things, whether they were aware that they had been charged for the particular service, whether they had received notice of the charges other than on their local telephone bill, and whether they had consented to the charges. 

The merchants consisted mostly of companies we had never heard of—such as 

More Local Reach, MyiProducts, YPD—that offered e-mail, third-party voice mail, 

computer technical support, online directory listings, website hosting, and other 

services. 

Conclusions drawn about the nature and scope of cramming 

Three main conclusions were arrived at as a result of our investigation: 

1. The level of consumer awareness about third-party charges on local telephone 

bills is very low. Of the 562 responses to 1,700 surveys mailed in connection 

with the first of the aggregators to be investigated, only 8 (1.4 percent) recalled 

having received any separate written notice of their charges (although the merchants claimed to have provided notice, either online or through the mail), and 

only an estimated 27.4 percent noticed the charge within the first 3 months of 

its appearance on their telephone bill.5

2. The incidence of cramming is very high. Of the 562 respondents, fully 503 

(89.5 percent) stated that they had not agreed to be charged for the third-party 

services that appeared on their telephone bill. Indeed, a number of these consumers indicated that they had no reason to order the services for which they 

were charged; the respondents gave such explanations as, ‘‘[I] have an answering machine [and so] would never use this service,’’ ‘‘I had voice-mail from the 

phone company [and] did not need [another service],’’ and ‘‘[I] can’t imagine 

agreeing to voice-mail since we have always had a personal voice recorder.’’ 

3. Deceptive telemarketing scripts have been used. Of the merchants who telemarketed their potential customers—usually businesses—a number used scripts 

that misstated the purpose of the call. Typical of those scripts was one employed by eBridge, Inc., which offered an online directory to local businesses 

using a script that began, ‘‘The reason I’m calling today is to make sure your 

information is listed correctly.’’ In fact, the reason for the call was to sign up 

the business for a $49.95-per month service. 

Merchant settlements 

The investigation also led to a series of settlements, all in the form of Assurances 

of Discontinuance, with eight merchants. It is anticipated that there will be another 

20 or more such settlements before the initiative is over. In all, the eight companies 

charged more than 7,000 consumers and 1,300 businesses in Vermont a total of over 

$639,000. 

The settlements were with the following companies: 

92 

6 An example of these settlements accompanies this testimony as Attachment 1. 

7The text of the law is set out in Attachment 2 to this testimony. 

• Douglas-Lambert Laboratories LLC, doing business as Orbit Telecom, of Henderson, Nevada, which charged more than 1,200 Vermonters over $119,000 for 

a voice-mail service between 2004 and 2006. 

• Durham Technology, LLC, d/b/a MyiProducts IMail, of Indianapolis, Indiana, 

which charged more than 1,300 Vermonters over $78,000 for a voice-mail service between 2005 and 2010. 

• eBridge, Inc., also known as Lawstar, Inc., doing business as B2B–ISP, eLinkISP, InMySip, MSMB–ISP, and Zip Wide Web, Inc., also known as ZWW–ISP, 

based in Encino, California, which charged 485 Vermont businesses over 

$93,000 for an online business directory service between 2004 and 2010. 

• Liveonthenet.com, based in Huntsville, Alabama, which charged 852 

Vermonters over $56,000 for personal computer technical support between 2005 

and 2008. 

• More Local Reach, Inc., of Boca Raton, Florida, which charged 214 Vermont 

businesses over $58,000 for online directory services between 2007 and 2010. 

• Residential E-mail LLC, based in Henderson, Nevada, which charged more than 

1,170 Vermonters over $65,000 for an e-mail service between 2005 and 2006. 

• The Internet Business Association, Inc., based in Carson City, Nevada, which 

charged 435 businesses over $86,000 for an Internet and website address service between 2007 and 2010. 

• YPD Corporation of Smyrna, Georgia, which charged 201 Vermont businesses 

over $84,000 for online directory services between 2007 and 2010.6

Given that there are many more such companies, consumer losses in Vermont 

over the past 6 years have likely totaled in the millions of dollars—a significant 

issue for a state with a population of only 620,000, and an indicator that the problem nationwide is very substantial. 

The solution: prohibition, not disclosure 

Vermont’s through-the-mail notice requirement enacted in 2000 to address the 

problem of cramming has not worked. For a decade, consumers have not received, 

seen or understood notifications that merchants claim to have provided; most of 

them have not readily noticed the merchants’ charges on their telephone bills; and 

very few of them recall ever having agreed to be billed. In short, despite the notice 

requirement, consumers have continued to be crammed, a fact that is not surprising 

in light of the low level of public awareness that non-telephone charges can appear 

on one’s telephone bill (any more than that third-party charges can be passed 

through to a person’s electric bill, fuel bill, or monthly mortgage account statement). 

In January 2011, the Attorney General’s Office presented legislation prohibiting 

most third-party charges on local telephone bills for introduction in the Vermont 

Legislature. With the support of the local telephone companies, this anti-cramming 

measure passed both the Vermont House and Senate by voice vote, and on May 27, 

2011, it was signed into law by Governor Peter Shumlin and became effective immediately. 

The new law,7 which amends the earlier notice requirement, 9 V.S.A. § 2466, contains a general prohibition on third-party charges to local telephone bills, with the 

following limited exceptions: 

• Billing for goods or services marketed or sold by a company subject to the jurisdiction of the Vermont Public Service Board; 

• Billing for direct dial or dial-around services initiated from the consumer’s telephone; and 

• Operator-assisted telephone calls, collect calls, and telephone services that facilitate communication to or from correctional center inmates. 

Vermont’s statutory approach takes account of actual consumer expectations-i.e., 

that consumers do not anticipate that they will be charged on their local telephone 

bills for third-party services. It is straightforward to enforce. It does not interfere 

with other methods of receiving payment for services provided, such as credit cards, 

debit cards, personal checks, and electronic funds transfers. And it is viewed as a 

solution to the problem of cramming in our state—one that other jurisdictions may 

wish to adopt in the future. 

93 

ATTACHMENT 1 

State of Vermont 

Superior Court 

Washington Unit 

In Re eBridge, Inc., a/k/a Lawstar, Inc., ) Civil Division 

d/b/a B2B–ISP, eLink-ISP, InMyZip, ) Docket No. 276–5–11Wncv 

MSMB2B–ISP, and Zip Wide Web, Inc., ) 

a/k/a ZWW–ISP ) 

Office of the ATTORNEY GENERAL Montpelier, Vermont 05609 

ASSURANCE OF DISCONTINUANCE 

WHEREAS eBridge, Inc., a/k/a Lawstar, Inc., d/b/a B2B–ISP, eLink-ISP, InMyZip, 

MSMB2B–ISP, and Zip Wide Web, Inc., a/k/a ZWW–ISP, (hereinafter referred to as 

‘‘eBridge’’), is a California corporation with offices 16133 Ventura Blvd., Suite 855, 

Encino, CA 91436; 

WHEREAS eBridge is a third-party provider of an online business directory to 

businesses, the charges for which were placed on local telephone bills with the assistance of a San Antonio-based company called Enhanced Services Billing, Inc. 

(ESBI); 

WHEREAS eBridge solicited Vermont businesses over the telephone to purchase 

its service; 

WHEREAS eBridge’s charges to businesses averaged $49.95 per month; 

WHEREAS during the period 2004 to 2010, eBridge charged a total of $93,007 

to 485 businesses for its services that appeared on local telephone bills in Vermont’s 

area code 802, with $16,983 refunded; 

WHEREAS sellers of goods or services that are to be charged on a consumer’s (including a business’) local telephone bill are required under 9 V.S.A. § 2466 to mail 

a notice to the party to be charged, containing information specified in the statute, 

including the consumer assistance address and telephone number specified by the 

Attorney General, which notice must be a separate document sent for the sole purpose of providing that information and may not contain any inducement to purchase 

goods or services; 

WHEREAS eBridge mailed notices to Vermont businesses that were charged for 

its services on their local telephone bills; 

WHEREAS the Attorney General alleges that eBridge violated the Vermont Consumer Fraud Act, 9 V.S.A. § 2466, by not complying with that provision’s notice requirements in that eBridge’s notices (i) failed to include the consumer assistance address and telephone number specified by the Attorney General; and (ii) did not constitute separate documents sent for the sole purpose of providing the information 

required by the statute; 

WHEREAS the script used by eBridge’s telemarketers stated at the outset, ‘‘The 

reason I’m calling today is to make sure your information is listed correctly.’’; 

WHEREAS the Attorney General alleges that the primary purpose of eBridge’s 

calls was, instead, to solicit the purchase of its service, which was explained later 

in the company’s telemarketing script; 

WHEREAS the Attorney General therefore alleges that eBridge’s script misrepresented the purpose of the company’s sales calls, in violation of the Consumer Fraud 

Act prohibition on deceptive trade practices, 9 V.S.A. § 2453(a); 

AND WHEREAS the Attorney General is willing to accept this Assurance of Discontinuance pursuant to 9 V.S.A. § 2459; 

THEREFORE, the parties agree as follows: 

1. Injunctive relief. EBridge shall comply strictly with all provisions of Vermont 

law, including but not limited to provisions of the Vermont Consumer Fraud Act, 

9 V.S.A. chapter 63, relating to the placement of charges on local telephone bills and 

the prohibition on deceptive trade practices. 

2. Consumer relief. 

a. For each business from which eBridge has received money through a charge 

on a local telephone bill with a number in area code 802, eBridge shall, within ten 

(10) business days of signing this Assurance of Discontinuance, arrange for an electronic credit record to the business’ local telephone company in the amount of all 

94 

such monies that have not been previously refunded. eBridge shall use due diligence 

to ensure that accurate credits are provided to each business to whom a credit is 

due. 

b. If a credit record sent under the preceding paragraph is not accepted or is returned by the local telephone company, eBridge shall, within ten (10) days of learning of the non-acceptance or the return, send to the business, by first-class mail, 

postage prepaid, a check in the amount of the credit due to the business’ last known 

address, accompanied by a letter in substantially the form attached as Exhibit 1. 

c. No later than 60 (sixty) days after signing this Assurance of Discontinuance, 

eBridge shall provide to the Vermont Attorney General’s Office the names and addresses of the businesses whose telephone numbers were credited, and to which letters and payments were sent, under this Assurance of Discontinuance, along with 

the date and amount of each credit or payment. 

d. No later than ninety (90) days after signing this Assurance of Discontinuance, 

eBridge shall pay the total dollar amount of all checks returned as undeliverable 

to the Vermont Attorney General’s Office to be treated as unclaimed funds, along 

with a list in Excel format of the businesses to whom the monies due were not paid 

and their last known addresses. 

3. Civil penalties, fees and costs. Within twenty (20) days of signing this Assurance of Discontinuance, eBridge shall pay to the State of Vermont, in care of the 

Vermont Attorney General’s Office, the sum of ten thousand dollars ($10,000.00) in 

civil penalties and costs. 

4. Binding effect. This Assurance of Discontinuance shall be binding on eBridge, 

its successors and assigns. 

5. Release. The State of Vermont hereby releases and discharges any and all 

claims that it may have against eBridge or its affiliates based on conduct or activities arising under or in connection with the Vermont Consumer Fraud Act prior to 

the date of this Assurance of Discontinuance. 

Filing Date: May 4, 2011 

Exhibit 1 (Letter to Businesses) 

Dear [Name of Business]: 

eBridge, Inc. has entered into a settlement with the Vermont Attorney General’s 

Office to resolve claims that we did not properly notify you of the fact that your 

business would be billed on your local telephone bill for our online business directory service, and that we used deceptive practices to interest you in buying our service. 

As part of that settlement, we are enclosing a refund check for all of these 

charges. You have no obligation to do anything in response to this payment. 

Sincerely, EBRIDGE, INC. 

ATTACHMENT 2 

Vermont ‘‘Anti-Cramming’’ Statute (2011) 

9 V.S.A. § 2466 is amended to read: 

§ 2466. GOODS AND SERVICES APPEARING ON TELEPHONE BILL 

(a) Except as provided in subsection (f) of this section, a seller shall not bill a consumer for goods or services that will appear as a charge on the person’s bill for telephone service provided by any local exchange carrier. 

(b) No person shall arrange on behalf of a seller of goods or services, directly or 

through an intermediary, with a local exchange carrier, to bill a consumer for goods 

or services other than as permitted by this section. This prohibition applies, but is 

not limited, to persons who aggregate consumer billings for a seller and to persons 

who serve as a clearinghouse for aggregated billings. 

(c) Failure to comply with this section is an unfair and deceptive act and practice 

in commerce under this chapter. 

(d) The attorney general may make rules and regulations to carry out the purposes of this section. 

(e) Nothing in this section limits the liability of any person under existing statutory or common law. 

(f)(1) This section shall apply to billing aggregators described in 30 V.S.A. § 231a, 

but shall not apply to: 

95 

(A) billing for goods or services marketed or sold by persons subject to the jurisdiction of the Vermont public service board under 30 V.S.A. § 203; 

(B) billing for direct dial or dial around services initiated from the consumer’s 

telephone; or 

(C) operator-assisted telephone calls, collect calls, or telephone services provided 

to facilitate communication to or from correctional center inmates. 

(2) Nothing in this section affects any rule issued by the Vermont public service 

board. 

The CHAIRMAN. Thank you very much, Mr. Burg. Now, we turn 

to Ms. Susan Eppley from Georgia, who has had some experience, 

that I think she’d like to share with us, about cramming. 

STATEMENT OF SUSAN EPPLEY, DECATUR, GA 

Ms. EPPLEY. Thank you Chairman Rockefeller, Ranking Member 

Hutchison, and members of the Committee. Thank you for having 

me here today. Good morning. My name is Susan Eppley and I’m 

from Decatur, Georgia. I’m here today to tell you about my personal experience with cramming. In early 2011, I worked for a successful franchisee of 32 quick-service restaurants as the accounts 

payable representative. 

This company, even in tough times, offers incentives to managers 

and crew, including but not limited to bonuses paid to managers 

for hitting their numbers, based on profit-and-loss statements. In 

October, I was entering the AT&T invoices. I got curious about how 

different the bills were from store to store. 

Upon investigation, I noticed that there were charges for services 

that were not from AT&T, our telephone company. I called AT&T 

and spoke with a customer service representative, who recognized 

the problem, and she explained that AT&T was billing on behalf 

of a third-party company. When I asked further, she said that it 

was the customer’s responsibility to block phone bills from such 

charges. She told me that she takes a lot of calls like mine. 

I contacted the third-party company at the phone number provided and spoke to their customer service representative, who said 

that we requested the service. I then contacted the area manager 

for this store and he said he didn’t request the service. So I went 

back and forth from area manager to the company until I just insisted that the charges were never requested, as only area managers have authorization to make those requests. 

Upon my insistence, the representative offered to take 3 months 

of the charges off and credit the AT&T bill for the next month. But 

I insisted that all $1,900 be credited back. The representative then 

said he couldn’t do that and that he had a recording of the request 

for service. I asked to hear it. I was then transferred to a supervisor, who then credited all the charges and I never heard a recording. 

For the next 2 months, I combed through every single AT&T bill 

for all of our accounts, set up a block on each account to prevent 

future cramming, and to my best estimation, I spent about 15 

hours dedicated to this issue alone. Those hours do not include the 

time our accounting department and area managers have spent on 

it. 

In the end, 6 of our 33 accounts were affected and the estimated 

total amount crammed onto our phone bills was about $4,200. 

Upon my persistence and insistence, that amount was credited 

96 

back. Even though, each time, the third-party company told me 

they had a recording proving that we requested each service, they 

never played that recording for me. It certainly is annoying and a 

hassle to deal with additional administrative paperwork, making 

additional phone calls, and keeping information organized, especially for services not requested. 

Our already busy accounting department had to deal with their 

own administrative issues, such as readjusting profit-and-loss 

statements, et cetera. But the inconvenience and cost of administrative paperwork on this issue pales in comparison to what it has 

taken away from the managers of our restaurants. These managers 

work long hours in a busy, demanding environment, all with a 

smile on their faces. They have a tremendous job, juggling employee relations, customer satisfaction, serving safe food, and controlling costs. 

As I mentioned earlier in my statement, great managers are rewarded with bonuses. And some of our managers, no matter how 

hard they work and no matter how much they earned it, did not 

receive their bonuses because of cramming. It is infuriating to me 

that it is legal for companies to, without authorization, charge our 

businesses, and skew our profit-and-loss statements, and in effect, 

take money out of the hands of hard-working, deserving men and 

women. 

I shudder to think that citizens, especially senior citizens who 

are on a fixed budget, are falling victim to cramming because they 

don’t have an accounts payable representative to check their phone 

bills for unauthorized charges. It is my hope that our lawmakers 

will prevent businesses and individuals from being a victim to 

cramming by making it illegal for AT&T and other companies to 

allow third-party billing. Thank you. 

[The prepared statement of Ms. Eppley follows:] 

PREPARED STATEMENT OF SUSAN EPPLEY, DECATUR, GA 

Chairman Rockefeller, Ranking Member Hutchison, and members of the Committee, thank you for having me here today. Good morning. My name is Susan 

Eppley and I am from Decatur, GA. I am here today to tell you about my personal 

experience with ‘‘cramming.’’ 

In early 2011 I worked for a successful franchisee of 32 quick service restaurants 

including Popeyes, Burger King and Krispy Kreme Doughnuts restaurants. I was 

the Accounts Payable representative and I entered invoices for the restaurants. This 

company, even in tough times, offers incentives to managers and crew including, but 

not limited to, bonuses paid to managers for ‘‘hitting’’ their numbers based on Profit 

and Loss statements. 

In October 2010, as I was entering the Popeyes’ AT&T invoices, I got curious 

about how different the bills were from store to store. Upon investigation, I noticed 

that there were charges for services that were not from AT&T. On one such bill, 

on the last page, the charges were from ILD Teleservices, Inc. The charge was 

$49.95 for ‘‘Efax SVC MNTHLY FEE.’’ 

I called AT&T and spoke with a customer service representative who recognized 

the problem. She explained that AT&T was billing on behalf of a 3rd party company. When I asked further, she said it is the customer’s responsibility to block 

phone bills from such charges. She told me that she takes a lot of calls like mine. 

I contacted the 3rd party company at the phone number provided on the bill and 

spoke to a customer service representative who stated that we requested the service. 

I then contacted the Area Manager for the store location and he said the charge 

was not requested. Back and forth I went from Area Manager to the company until 

I insisted that the charges were never requested as only Area Managers have authorization to request services. Upon my insistence, the representative offered to 

take 3 months of the charges off and credit the AT&T bill for the next month but 

97 

I insisted that all $1,900 be credited back. The representative then stated he could 

not do that and that he had a recording of the request. I asked to hear it. I was 

transferred to a supervisor who then removed all the charges. I never heard a recording. 

For the next two months, I combed through every AT&T bill for all of our accounts, set up a block on each account to prevent future cramming and to my best 

estimation, I spent 15 hours dedicated to this issue alone. Those hours do not include the time our Accounting Department and Area Managers have spent on it. 

Throughout this process I wrote the Better Business Bureau and did some on-line 

research about cramming. I was amazed to find how many small businesses are 

being taken advantage of by New Link Network. I learned that employees of small 

businesses who answer the phone are asked by fast-taking sales representative if 

they would like to optimize their sales by being listed in a free directory (or something similar). If the employee responds, ‘‘yes’’ at any point, the sales rep considers 

that a contract and begins the billing after a 1–3 month free trial. 

In the end, six of our 33 accounts were affected. Popeyes, Krispy Kreme and even 

our corporate office accounts were ‘‘crammed.’’ The estimated total amount 

‘‘crammed’’ onto our phone bills was about $4,200. Upon my persistence and insistence that amount has been credited back. And even though each time the third 

party company told me that they had a recording proving that we requested each 

charge, they never played that recording for me. 

It certainly is annoying and a hassle to deal with additional administrative paperwork, making additional phone calls and keeping information organized especially 

for charges not requested. Our already busy Accounting Department had to deal 

with their own administrative issues such as re-adjusting Profit and Loss statements, etc. But the inconvenience and cost of administrative work on this issue 

pales in comparison to what it has taken away from the managers of the restaurants. 

Quick service restaurant managers work long hours in a busy, demanding environment all with a smile on their faces. They have a tremendous job juggling employee relations, customer satisfaction, serving safe food and controlling costs. As I 

mentioned earlier in my statement, great managers are rewarded with bonuses and 

some of our managers, no matter how hard they worked and no matter how much 

they earned it, did NOT receive their bonuses because of the practice of ‘‘cramming.’’ 

It is infuriating to me that it is legal for companies to, without authorization, 

charge our businesses and skew our Profit and Loss statements and, in effect, take 

money out of the hands of hard working, deserving men and women. 

I shudder to think that citizens, especially senior citizens who are often on a fixed 

budget, are falling victim to cramming because they don’t have an Accounts Payable 

Representative to check their phone bills for unauthorized charges. 

It is my hope that our lawmakers will prevent businesses and individuals from 

being a victim to cramming by making it illegal for AT&T and other companies to 

allow 3rd party billing. 

Thank you. 

The CHAIRMAN. Thank you very much. I wish there were more 

consumers like you. I mean, you’ve just—you are a bulldog, but you 

had to be. 

Ms. EPPLEY. Thank you, sir. 

The CHAIRMAN. I guess that’s not complimentary, but I meant it 

to be. Our next witness is Dave Spofford, who is the President of 

Xigo, and you’re from Manassas, Virginia. And what do you have 

to tell us? 

STATEMENT OF DAVID SPOFFORD, 

CHIEF EXECUTIVE OFFICER, XIGO, LLC 

Mr. SPOFFORD. Chairman Rockefeller, other Senators, members 

of the Committee, thank you for having me here today. My name 

is David Spofford. I’m the founder and CEO of Xigo. We’re a communications expense management company based in Manassas, 

Virginia. And thank you for your commitment to investigating this 

very important issue of cramming. 

98 

I have a 20-year background in telecommunications contracts 

and billings and I’ve never seen cramming as bad as it is today. 

As we process tens of thousands of carrier invoices every month for 

our customers, and are responsible for removing these third-party 

charges for many of our clients, we are particularly interested in 

this subject matter. 

Cramming or unauthorized charges by communications carriers 

on behalf of third parties has been and remains a major problem 

for the industry. Xigo manages approximately $1 billion per year 

in telecommunications expenses for more than 200 clients. We have 

built software that helps companies of all sizes manage their communications expenses and identify areas where they can cut costs. 

We are a member of the Telecommunications Expense Management Industry Association, for which I have served as President. 

Our clients spend from $50,000 to $10 million per month on a 

variety of telecommunications services. We monitor their invoices 

every month, which allows us to identify trends, recurring problems, and the results of our joint efforts to get control of the 

telecom expenses. 

Because of this, we have a unique view into the world of telecommunications billings and services. After reviewing 3 years of 

historical data, we have found the following information that I 

hope will help the Committee to investigate this problem. We have 

found 40,000 unique instances of cramming during that timeframe. 

The recurring amount for an average cram is approximately $18 a 

month. We estimate that over 80 percent of all businesses experience cram charges. Seventy-one percent of our customers have experienced cram charges just in the last 3 years. 

Since the average charge is small and the time investment required to eliminate the charge is high, many customers simply pay 

the charge. Xigo has identified several major third-party billing— 

third-party billing consolidators who are responsible for the majority of these charges. 

In addition, we have identified approximately 600 third-party 

biller names that are used to bill nearly 3,000 different line item 

charges. The large quantity of biller names that are used by a 

much smaller number of actual billers may be a strategy to avoid 

automated detection by systems like ours. These charges often have 

descriptions such as voicemail, e-mail, directory services, web 

hosting, and other names that appear to be normal services to the 

customer. 

As it turns out, more than 99 percent of these charges are unauthorized by the customer and are for services that they are not receiving. Decentralized, multi-location companies seem to have more 

exposure than other businesses. Some large retail chains, for example, are particularly hard hit. 

The more invoices a business receives, the harder cramming is 

to detect, since it may be assumed that the remote location may 

have ordered one of these services that are being billed. Xigo has 

provided the Committee staff with the details and the names of the 

third-party billers and line-item descriptions commonly used for 

these charges. The communications industry, both fixed and mobile, is already complex and growing quickly. 

99 

A stop to the practice of cramming would be a welcome relief to 

all communications customers. Chairman Rockefeller, I thank you 

for your time. Xigo is committed in supporting your efforts in any 

way that we can. We look forward to working with you in putting 

a stop to this problem. 

[The prepared statement of Mr. Spofford follows:] 

PREPARED STATEMENT OF DAVID SPOFFORD, CHIEF EXECUTIVE OFFICER, XIGO, LLC 

Chairman Rockefeller, Ranking Member Hutchison, and members of the Committee, thank you for having me here today. 

My name is David Spofford. I am the founder and CEO of Xigo, a cloud-based 

communications expense management company, based in Manassas, Virginia. I 

want to thank you for your commitment to investigating this very important issue 

of cramming. 

I have a 20 year background in telecommunications contracts and billing and I 

have never seen cramming as bad as it is today. As we process tens of thousands 

of carrier invoices every month and are responsible for removing third party charges 

for many of our clients, we are particularly interested in this subject matter. Cramming, or unauthorized charges by communications carriers on behalf of third parties, has been, and remains a problem for the industry. 

Xigo manages approximately $1 billion per year in telecommunications expenses 

for more than 200 clients. We have built software that helps companies of all sizes 

manage their communications expenses and identify areas where they can cut costs. 

We are a member of the Telecommunications Expense Management Industry Association (TEMIA), for which I have served as President. Our clients spend from 

$50,000 to over $10 million per month for a variety of telecom services. 

We monitor our clients’ telecom invoices every month—allowing us to identify 

trends, recurring problems, and the results of our joint efforts to get control of 

telecom expenses. Because of this, we have a unique view into the world of telecommunications billing and services. 

After reviewing three years of historical data, we have found the following information, that I hope will be helpful as you continue to investigate this problem: 

• We have found 40,000 unique instances of cramming during that timeframe; 

• The recurring amount for an average cram is approximately $18 per month; 

• We estimate that over 80 percent of business users experience cram charges; 

• 71 percent of our customers have experienced a cram charge during the past 

3 years. 

Since the average charge is small and the time investment required to eliminate 

the charge is high, many customers simply pay the charge. Xigo has identified several major third party billing consolidators who are responsible for the majority of 

these charges. In addition, we have identified approximately 600 Third Party biller 

names that are used to bill nearly 3,000 different line item charges. The large quantity of biller names that are used by a much smaller number of actual billers may 

be a strategy to avoid automated detection by systems like ours. 

These charges often have descriptions such as ‘‘Voice Mail,’’ ‘‘E-mail,’’ ‘‘Directory 

Services,’’ ‘‘Web Hosting’’ and other names that appear to be normal services to the 

customer. As it turns out, more than 99 percent of these charges are unauthorized 

by the customer and are for services that they are not receiving. 

Decentralized, multi-location companies seem to have more exposure than other 

businesses. So large retail chains, for example, are particularly hard hit. The more 

invoices a business receives the harder cramming is to detect since it may be assumed that the remote location may have ordered one of these ‘‘services’’ being 

billed. 

Xigo has provided the Committee staff with the details of the names of third party 

billers and line item descriptions commonly used for the charges. The communications industry, both fixed and mobile, is already complex and growing quickly. A 

stop to the practice of cramming would be a welcome relief to all communications 

customers. 

Chairman Rockefeller, Ranking Member Hutchinson and members of the Committee, I thank you for your time. Xigo is committed to supporting your efforts in 

any way that we can. We look forward to working with you and putting a stop to 

this problem. 

100 

The CHAIRMAN. Thank you, Mr. Spofford, very much. And our 

final witness will be Mr. Walter McCormick, who is President of 

the United States Telecom Association here in Washington. 

STATEMENT OF WALTER B. MCCORMICK, JR., PRESIDENT 

AND CEO, UNITED STATES TELECOM ASSOCIATION 

Mr. MCCORMICK. Thank you, Mr. Chairman. Chairman Rockefeller, Senator Ayotte, members of the Committee, thank you for 

giving me the opportunity to testify today on behalf of the United 

States Telecom Association. And I might add, it’s a personal pleasure for me to be back before this committee, which I had the honor 

for serving for many years as General Counsel to the Majority and 

as Chief Counsel to the Minority. 

Mr. Chairman, our industry accepted your invitation to appear 

here today for three reasons: first, to acknowledge the existence of 

a continuing problem, one that impacts consumers, one that has 

continued for many years despite remedial measures undertaken 

by our industry and by the Federal Communications Commission. 

Second, we appear here today to both honor and to cooperate in 

your efforts to draw attention to cramming and to eliminate it. 

And third, we appear to pledge our industry’s good faith commitment to work with you, to work with the Committee, and with the 

appropriate Federal regulatory agencies toward further reforms. 

Mr. Chairman, our position, simply put, is that consumers should 

not be charged for services they did not purchase. 

For our industry, third-party billing had its genesis in a well-intentioned, pro-consumer initiative by the federal government. In 

the wake of the AT&T divestiture, the FCC required telephone 

companies that had been part of the Bell System to bill and collect 

charges on behalf of competing long-distance carriers and enhanced-services providers. 

Federal regulators believed that the convenience of having all 

communications-related services on a single bill was an important 

pro-competition, pro-consumer policy. Although no longer required, 

third-party billing continues to be valued by many legitimate businesses and by some consumers as a convenience. 

Three interrelated measures formed the foundation of the basic 

consumer protection framework that is in place today. They are the 

industry’s anti-cramming best practices guidelines, the FCC’s 

Truth in Billing order, and agency enforcement. 

Pursuant to these measures, the steps that telephone companies 

are taking to protect their customers fall into four distinct categories. 

The first level of protection seeks to prevent bad actors from getting access to the telephone bill in the first place. Contractual commitments with billing aggregators require active oversight from all 

service providers for whom they submit charges. 

The second level of protection seeks to make charges on a customer’s bill clear and transparent. For example, third-party 

charges are aggregated in a separate section of the bill, along with 

notification that such charges may be contested without risking 

phone service. 

The third level of protection is to provide an instant credit to any 

customer that notifies the company that a charge on their bill is 

101 

not authorized. The policy of leading companies in the industry is 

to eliminate the charge, no questions asked. The goal of this firstcall approach is to provide the consumer with full relief without 

further hassle, including an offer to block further charges from that 

service provider and to review prior bills to see if similar charges 

that previously went unnoticed need to be removed as well. Finally, 

many companies offer the customer the option of placing a block on 

all third-party charges. 

The fourth level of protection involves monitoring, and audits, 

and suspension of service to problem providers. These measures, 

taken together, can have dramatic results. One of our companies 

reports having achieved an 89 percent reduction in cramming complaints since January 2010. 

Nevertheless, Mr. Chairman, as this hearing and your investigation demonstrate, the problem of cramming persists. So Mr. Chairman, we close our testimony as we began—by acknowledging the 

existence of a continuing problem and by committing ourselves to 

working with you and the Committee in addressing it. 

[The prepared statement of Mr. McCormick follows:] 

PREPARED STATEMENT OF WALTER B. MCCORMICK, JR., PRESIDENT AND CEO, 

UNITED STATES TELECOM ASSOCIATION

Chairman Rockefeller, Ranking Member Hutchison, members of the Committee, 

thank you for giving me the opportunity to appear before you today and present the 

views of our industry on the important issue of preventing ‘‘cramming.’’ 

The United States Telecom Association represents broadband service providers 

engaged in the business of offering advanced communications services. Previously 

known, years ago, as the United States Telephone Association, USTelecom today 

represents companies offering a wide range of voice, video, and data services, on 

both a fixed and mobile basis, in markets both urban and rural. Our member companies range in size from the largest publicly-traded communications corporations 

to small privately-owned companies and rural cooperatives. 

Mr. Chairman, simply put, consumers should not be charged for services they did 

not purchase. I appreciate this opportunity to describe the measures that are being 

taken in our industry, both voluntarily and in compliance with Federal regulation, 

to prevent cramming. 

The FCC has identified three parties as typically being involved in the billing 

chain for products or services being charged on the consumer’s telephone bill—the 

third-party provider of that product or service, the billing consolidator or clearinghouse, and the local exchange company that presents the invoice to its customer. 

Each has a separate and distinct role and responsibility in relation to the consumer, 

and in protecting against fraud. The focus of my testimony will be on the third part 

of that chain, the local exchange carrier. 

At the outset, it is important to note that with regard to local exchange companies, third-party billing had its genesis in a well-intentioned pro-consumer initiative 

by the Federal Government. In the wake of the AT&T divestiture, the FCC required 

telephone companies that had been part of the Bell System to bill and collect 

charges on behalf of competitive long distance carriers and enhanced services providers offering services such as phone mail, paging, prison calls, and conference calling—often in competition with the local exchange provider. While large long distance carriers contracted directly with the local exchange companies for billing, 

consolidators and clearinghouses served as middlemen for competitive service providers that were too small, or w ho had too few transactions, to contract directly 

with each local exchange company for billing services. The convenience of having all 

telecommunications-related services incorporated into a single bill was believed to 

be a pro-competition, pro-consumer requirement. Although the federal government 

later eliminated these regulations, the provision of third-party billing and collection 

services continues to be considered by many entirely legitimate businesses as an efficient and consumer-friendly way to bill for their products or services, and by many 

consumers as a convenience. 

The history of the cramming problem is well known to this committee. As telephone companies opened their billing systems to industry competitors and thirdVerDate Nov 24 2008 08:45 Dec 15, 2011 Jkt 071640 PO 00000 Frm 00105 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\71640.TXT SCOM1 PsN: JACKIE
102 

party providers, scammers and con artists took advantage of the ease with which 

they could obtain telephone numbers, and began defrauding both telephone companies and their customers by invoicing consumers for services that had not actually 

or knowingly been purchased. In response to a rapid growth in consumer complaints 

in the late 1990s, FCC Chairman Bill Kennard responded with a three-part initiative: 

1. A challenge to the industry: to develop and implement a voluntary code aimed 

at preventing unauthorized charges from ever appearing on consumer bills. The 

industry responded immediately—producing ‘‘Anti-Cramming Best Practices 

Guidelines’’ within two months. 

2. The promulgation of new ‘‘truth-in-billing’’ rules: to assure consumers that 

telephone bills would be well-organized and easily understandable, with full and 

non-misleading descriptions of charges, and directions on how to make inquiries 

about, or contest charges on, individual bills. 

3. Aggressive enforcement: to take action against parties engaging in fraudulent 

practices. 

These three complementary and inter-related measures—the industry’s 1998 AntiCramming Best Practices Guidelines, the FCC’s 1999 Truth-in-Billing Order, and 

agency enforcement—form the foundation of the basic framework in place today. 

Although quite detailed, the key elements of the Best Practices can be summarized 

as calling upon local exchange carriers to provide: 

• Pre-acceptance screening of third-party products, services and marketing materials; 

• Procedures for monitoring complaint levels, and establishment of complaint 

level thresholds for terminating billing services for individual providers and billing aggregators; 

• Procedures for authorization and verification of charges to ensure that consumers have, in fact, knowingly approved of them; 

• Clear descriptions of charges, and information on how the consumer may challenge them; 

• Options for consumers to take advantage of in order to control the types of 

charges that may appear on their bills; and 

• Commitments to law enforcement and regulatory agencies to work cooperatively 

with them in eliminating cramming. 

Today, just as the crammers, scammers and con artists have adopted new and 

more sophisticated approaches to evading detection, local exchange companies operating in conformance with the Best Practices have continued to evolve and improve 

their billing practices to guard against consumer fraud. The steps that telephone 

companies are taking in order to better protect their customers fall into four distinct 

categories. 

The first level of protection involves seeking to prevent bad actors from ever getting access to the telephone bill in the first place. This protection is sought through 

contractual commitments from billing aggregators requiring them to undertake active oversight of all service providers for which they intend to submit charges. For 

example, such contractual provisions typically: 

• Require the billing aggregator to obtain a detailed application for each new 

service provider, including a review of ownership and product information, the 

bill description of the service, 800 customer service numbers and marketing materials. 

• Require aggregators to obtain signed commitments from service providers that 

they will utilize acceptable authorization and verification processes and agree 

to audits of documentation. Such processes typically involve traditional letterof-authorization or third-party-verification, with double-click options and ‘‘welcome packages’’ increasingly being employed on Internet-based transactions. 

• Require aggregators to maintain a website and toll free number for handling 

customer inquiries and complaints. 

• Set cramming complaint thresholds for billing aggregators and individual providers, and provide for suspension or termination of billing services if those 

thresholds are exceeded. Such contractual provisions often include penalties to 

be paid by the aggregator for each complaint received in order to incent active 

oversight. 

• And, require the billing aggregator to be subject to audits of its contractual obligations, and to pay penalties for being out of compliance. 

103 

The second level of anti-cramming protection involves continuing efforts to make 

new charges on a customer’s bill as clear and transparent as possible. This, of 

course, is both consistent with, and pursuant to, the requirements of the FCC’s 

Truth-in-Billing Order. For example, third-party charges are aggregated in a separate section of the consumer’s bill, along with notification that such charges may 

be contested without risking phone service continuity. The Order requires that each 

charge be described in sufficient detail for the customer to understand it; and that 

contact information be provided for each service provider. Some telephone companies have found that, whenever a new charge appears on a customer’s bill for the 

first time, it is helpful to highlight that charge on the first page of the bill with 

an explanation that it is a new charge from a third-party along with information 

for contesting the charges. And, as previously mentioned, the use of ‘‘Welcome Packages’’ in which the third-party provider sends information to the customer with specific detail concerning the terms of the purchase provides another level of assurance 

that the consumer has knowingly agreed to the charges. 

The third-level of anti-cramming protection afforded to consumers by telephone 

companies is to provide an instant credit to any customer that notifies the company 

that there is a charge on their bill that is not recognized and/or unauthorized. The 

common practice among leading companies in the industry is to eliminate the 

charge—no questions asked. The goal of this ‘‘first-call’’ approach is to provide the 

customer with full relief without further hassle. And, while the customer is still on 

the phone, the company will offer to block further charges from that service provider, and to review prior bills to see if similar charges that previously went unnoticed need to be removed as well. Finally, many leading companies—including 

AT&T, Fairpoint, Frontier, Verizon and others—offer the customer the option of 

placing a block on all third-party charges, at no cost. 

The fourth level of protection involves monitoring and audits. An essential element of cramming prevention is continuous review of cramming complaints to identify problems and to invoke the remediation provisions in the contracts with billing 

aggregators and individual providers—measures that include financial penalties, 

suspension of service, or termination of third-party billing services. 

These measures, taken together, can have dramatic results. AT&T, for example, 

through a combination of audits, imposition of financial penalties for each cramming 

complaint received, and enforcement of complaint thresholds achieved an 89 percent 

reduction in consumer cramming complaints in a 17-month period—between January 2010 and May 2011. 

Nevertheless, as today’s hearing demonstrates, the problem of cramming persists. 

As the technology and sophistication of con artists and scammers increases, ‘‘best 

practices’’ must evolve, and all parties in the billing chain need to elevate efforts 

to prevent consumer fraud. Today’s forum is an important step in that direction. We 

appreciate being given the opportunity to be a part of it. 

The CHAIRMAN. All right. I thank you very much for that. I need 

to point out that our two votes of the morning—I think it’s two 

votes—have started. So what I’d like to do is to—first, nobody 

panic. We’ll be back. What we’ll do is, we’ll let Amy Klobuchar, who 

has just—— 

Senator KLOBUCHAR. I have to go. 

The CHAIRMAN.—got to go. She has got to go. So do you want to 

ask a question? Because we could have time for one or two questions. Then we go vote, and then on the second vote, we vote immediately, and then come right back. It should be no more than 15 

minutes. Can you live with that? All right. 

Senator AYOTTE. Mr. Chairman, why don’t you go? 

The CHAIRMAN. All right. I will. Attorney General Madigan, the 

word was used by Mr. McCormick, the word convenience. And I’m 

very fond of that word because I’ve been trying to—I’m just a student of Oriental languages and even Zen Buddhism. And I’m trying 

to figure out what the word convenience means because it’s frequently used by telephone companies. 

Now, look, you’ve brought 30 lawsuits against companies. In one 

of your recent cases last September, you filed against a California 

company called ID Lifeguards. And this company charged more 

104 

than 5,000 of your Illinois citizens at $12.95 a month for a so-called 

identity protection service. But when your office contacted these 

consumers, they told you they’d never authorized these charges, 

didn’t know the charges had gotten on their phone bills, didn’t 

know how, and that’s correct, is it not? 

Ms. MADIGAN. That is correct, Mr. Chairman. 

The CHAIRMAN. Did any—you know, we’ve had hundreds of companies like this. And where does the word convenience—the telephone companies use the word convenience. They used it at the— 

when they were talking about, we’ll fix it ourselves. They use it 

now. How has this become a convenience? 

Ms. MADIGAN. Mr. Chairman, I think the only people who would 

describe third-party charges being crammed on phone bills as a 

convenience might be the carriers, the aggregators, and the vendors. I think, as Ms. Eppley testified, it is not a convenience. It is 

an enormous and expensive hassle for individuals, businesses, and 

government agencies, who are constantly having to be aware of the 

fact they may be crammed, and then go through a very time-consuming process to have these charges removed, you know. 

Unlike the testimony that Mr. McCormick gave, we have found 

that when consumers have tried to remove these charges by contacting their carrier, they’re given the run-around. They’re told 

that they can’t do anything about it, they’ll have to contact the vendor. They had nothing to do with the service and the charge being 

put there in the first place. 

And then, as Ms. Eppley went through the experience that she 

went through, is very similar to that of the consumers we’ve talked 

to. So to give you just a little more detail in terms of our case 

against ID Lifeguards, there was a 56 percent refund rate, 56 percent. 

So in other words, of the, you know, 5,000 plus consumers in the 

State of Illinois who were crammed, 56 percent of them had the 

wherewithal to find this and have it removed from their bill. That 

is a clear indication that it is just outright fraud that’s being 

phased in. I think part of the protection service, I recall, is that 

they were supposed to be receiving a copy of their credit report. No 

individuals that we talked to had ever received a copy of their credit report. So understand, there’s no convenience. It is a terrible inconvenience. That’s just the reality. 

The CHAIRMAN. I think you’re right. Let me call a 15-minute recess and we will be right back. 

[Recessed.] 

The CHAIRMAN [presiding]. Attorney General Madigan, let me 

just finish out my question with you. I am really fascinated—and 

I want Mr. McCormick to answer this, too. I mean, all we did was 

the eight largest telephone companies. 

Ms. MADIGAN. Yes. 

The CHAIRMAN. That’s our search. I mean, imagine if we—if we 

started going elsewhere, how much we’d find, state governments, 

federal government. Why do they do that? These are huge companies. They make some money from it, yes, but hopefully, they’re 

going to get a lot of bad publicity and embarrassment about it. 

They made us a promise. They broke that promise. 

105 

I don’t know whether they—you know, the CEO that I had in my 

office yesterday, whether he knew about it or not. I don’t think he 

did. So that’s the big corporate structure, and it’s always the middle people, but they, you know—eventually, everything is money 

and it’s on an account, it’s on a report, and the company is responsible for what they do. Why do they do this? 

Ms. MADIGAN. Well, Mr. Chairman, obviously, Mr. McCormick’s 

response to this will be enlightening. We wouldn’t disagree with 

you from the perspective, you know, of what we’ve seen with consumers. There is an obvious financial opportunity for the carriers 

because they are receiving a portion of those charges that ultimately end up on unsuspecting consumers’ phone bills. 

The CHAIRMAN. But not that much. 

Ms. MADIGAN. Not that much, but this has been going on for 15 

years and so, over that period of time, it obviously adds up to, you 

know—it’s some money. And in another way—and another thing 

you probably need to look at is the fact that landline service is a 

declining service and many people are now relying solely on the 

wireless carriers to provide them with their phone service. 

And so it may be looked at as, you know, here is one of our last 

opportunities to earn some money. I don’t think that’s the proper 

way to look at it, from a business perspective, and—but that’s really all that we can come up with in terms of why they allow this 

to go on, because consumers are absolutely furious, as—as I stated, 

and I think others have as well, on the panel. 

People are completely unaware of the fact that their phone number can be used as a credit card. I was talking to my husband last 

night. So the husband of the Illinois Attorney General, who admittedly is—is not a lawyer, doesn’t, you know, delve into this—and 

I explained to him what we were talking about today, and he said, 

I had no idea that, that could be done. 

And so, you know, if the husband of the Illinois attorney general 

doesn’t realize that your phone number can be used, essentially, as 

a credit card, I would argue, very few to nobody understands that 

in this country. 

The CHAIRMAN. Senator Ayotte and I were talking, going over to 

vote and coming back, that I don’t remember a previous example 

of when a telephone number becomes the same as a credit card. It 

can be used as a credit card. Do you know of such instance? 

Ms. MADIGAN. No, we don’t know of any other instances of this, 

and you know, clearly, consumers don’t realize it, which is why the 

vast majority of them never even find these unauthorized charges 

on their phone bill. 

The CHAIRMAN. Well, I mean, here is—here is one of the typical, 

as is AT&T, and I think it’s five pages long, and it has got very 

small print. And in fact, even with my recently corrected glasses, 

I have to really look hard to find down here which is the cram, that 

it’s USBI. Now, of course, it doesn’t say what they’re doing. They 

have a telephone number. 

I have no idea what 1–888 plus seven other numbers will get you, but anyway, what they have to pay is $19.95. And they have 

to do it every month. And then there’s some more stuff that—and 

you—after page five. I mean, who goes through this? I mean, you 

do, Ms. Eppley, because you’re an American heroine—and an acVerDate Nov 24 2008 08:45 Dec 15, 2011 Jkt 071640 PO 00000 Frm 00109 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\71640.TXT SCOM1 PsN: JACKIE
106 

countant. But here’s some more, at the back, at the end. Well, who 

goes through this? 

Ms. MADIGAN. Almost nobody, and Mr. Chairman, so you know, 

there—the—— 

The CHAIRMAN. But isn’t the point that they shouldn’t have to go 

through it? 

Ms. MADIGAN. Absolutely. 

The CHAIRMAN. I mean, there shouldn’t be the doubt, the suspicion I’m about to be had, so I’m going to go through every single 

line on this telephone bill, particularly from huge companies like 

that, that make hundreds of millions of dollars. Mr. McCormick, 

how do you answer? You promised that you would take care of the 

problem on a voluntary basis, in such strong language that we, unfortunately for us, to our embarrassment, accepted that. And now, 

we’re in the mess that we’re in and nothing has changed. Why do 

companies do this? 

Mr. MCCORMICK. Mr. Chairman, I’m aware of that commitment 

that was made in the late 1990s, and as I began my testimony 

today, we agree that this is a continuing problem, and that it needs 

to be addressed, and we want to work with you on it. Even you 

asked about what’s convenient—— 

The CHAIRMAN. No, no, that’s not the question I asked, is it? We 

want to continue to work with you on it. I’m aware of the problem. 

We want to continue to work with you on it. That’s more or less 

what you said 10 years ago, in stronger language. 

What I said is, why do they do it? Why does a company as large 

as AT&T, and this, you know, PepsiCo—there are a whole lot of 

people on that list that do this and that get this money. Why do 

they do it? I don’t understand it. It’s bad publicity. It’s scamming. 

It’s called cramming, but it’s really scamming. It’s con artist stuff. 

It can’t be very good for a telephone company to have that reputation, which we’re going to paint right on them. 

Mr. MCCORMICK. Mr. Chairman, I can share with you what my 

companies have told me when I’ve asked that very question, which 

is that the system began with a Federal requirement, that it was 

coupled with State requirements in various states around the country, that it is even unclear today whether or not the industry has 

the ability in every State to no longer engage in this business. And 

I believe the staff report that you released this morning indicates 

that there is some uncertainty in that area. And—— 

The CHAIRMAN. OK. Let’s say there’s some uncertainty. Why 

would they—and I’m not willing to stipulate that at this point, but 

why would a telephone company take the chance? I mean, to most, 

there doesn’t seem to be a lot of questions. It’s illegal. It’s wrong. 

It’s scamming. So why would they take that chance? 

Mr. MCCORMICK. Well—— 

The CHAIRMAN. They don’t—they don’t make that much from it. 

Mr. MCCORMICK. Correct, this is—— 

The CHAIRMAN. So why? Why haven’t—why haven’t you cleaned 

up your act? Why haven’t—why haven’t they just said, stop it, from 

the CEO right on down, just a little e-mail to about 30 mid-level 

people, stop it, stop doing it, except for the authorized charges? 

Mr. MCCORMICK. I don’t know the answer to that question, other 

than to reinforce what I had mentioned a moment ago about the 

107 

fact that it began as a Federal requirement. And again, you know, 

the industry has taken significant steps. Even the report that you 

issued today indicates that there has been improvement, but it remains a very, very significant, very pervasive problem and a real 

challenge, as you indicate, once you identify a scammer, that those 

scammers quickly come back in another disguise. So it’s a very, 

very significant challenge. 

The CHAIRMAN. All right, Senator. 

Senator AYOTTE. Thank you very much, Mr. Chairman. I wanted 

to follow up with Attorney General Madigan. Could you help me a 

little bit, in terms of, what are the current laws and penalties in 

place to address cramming and what is it that has been difficult 

in addressing this through a prosecution route? 

You know, I think about when somebody steals from a convenience store, we don’t shut down the store. We go after the thieves. 

So, when you advocate banning all third-party charges, I just want 

to understand what the difficulties are and why that should be the 

route versus some other route. 

Ms. MADIGAN. Sure. We want to ban third-party charges on 

phone bills because we have yet to see anything legitimate, in 

terms of the products or services. People are obviously unaware 

and it shouldn’t be the responsibility of law enforcement to essentially play Whack-a-Mole with these organizations. 

You’ve heard a number of people testify this morning that there 

might be a law enforcement action that ultimately results in that 

vendor being kicked off the carrier’s billing platform. But they simply reappear with another name and are engaging the exact same 

activities, so much so that there’s actually an entity that we’ve filed 

a lawsuit against twice, because you know, we got rid of them once 

and they reappeared, doing almost exactly the same thing. 

And so it is unreasonable, I would argue, that it requires, you 

know, State-level law enforcement, Federal-level law enforcement 

to constantly be going after something that is clearly deception and 

fraud. We end up—and you asked me, of course, about what laws 

we use. We use our Consumer Protection Act to go after these, the 

vendors, and again, when we end up going after folks, recognize 

these are the people who have the wherewithal to eventually contact the Attorney General’s office. 

The vast majority of people, if they ever become aware of these 

charges, will call their carrier. Very few of them make it to us. And 

so at the end of the day, you have to say, well, if we’re getting, you 

know, five complaints about one company, frequently, by the time 

we start the investigation, they’ve moved on, because they know 

they’re engaged in fraud and they know that, if there’s a significantly high refund rate, there is a chance that they will be thrown 

off the billing platform. 

So they’re clever, in the sense that they’re constantly reconstituting, changing their name, changing the type of service they’re 

providing, hiding it under, you know, different lines on the phone 

bills. So I mean, I would liken it to Whack-a-Mole. You’ve obviously 

heard that analogy before, but this is, you know, a serious situation 

that is costing individuals, businesses, and government agencies 

significant amounts of money every single year. 

108 

Senator AYOTTE. And as a follow-up on the Federal end, you said 

you had been working with the FTC? 

Ms. MADIGAN. The FTC has had workshops and obviously been 

engaged in this over the years. 

Senator AYOTTE. And they’re also able to pursue these crammers 

under Federal law as well? 

Ms. MADIGAN. And I believe they have. I don’t know the details 

of their lawsuits, but I know that they have had significant actions. 

Senator AYOTTE. Because one of the issues, obviously, we would 

also be interested in looking at, is making sure that the tools—on 

the law enforcement end, that they have the tools that they need 

to go after the bad actors. I wanted to follow up with Mr. Burg to 

ask you. You had said that Vermont originally had a notice statute—— 

Mr. BURG. Yes. 

Senator AYOTTE.—in place that was ineffective. And why wasn’t 

the notice effective? Why did it fail, in your view, when comparing 

the notice piece versus the ban on the third-party billing? 

Mr. BURG. Senator, I think the notice requirements failed because of the extremely low level of understanding of the public 

about how local phone bills can be used as a way of charging people 

for unrelated goods and services. So you’re—you’re not going to 

open the letter that comes from the vendor if it looks like a piece 

of junk mail, because why would you? 

You’re not going to scrutinize your phone bill because it’s your 

phone bill and you’re being charged for your phone service; isn’t 

that correct? But it’s not correct, because there may be something 

on there that’s unrelated to your phone bill. We have been working 

for decades to try to get people to scrutinize their credit card account statements, where you can be charged for lots of unrelated 

things. And that has even been—been difficult, as this committee 

knows, from the Data-PASS discussions of last year and the year 

before. 

Here, the phone bill is so far afield of normal payment mechanisms for general goods and services, that people are not looking 

there. And so this is one of the reasons why you have a huge disparity between the number of complaints that are filed and the 

number of victims that you have, which is sort of a—to have that 

complaint base as a prerequisite to good law enforcement action, 

that we find very few complaints, and a huge number of victims, 

again, not surprising in light of the low level of consumer understanding. 

Senator AYOTTE. Can you clarify the process when these notices 

are sent, to the bad actors that are participating in this? 

Mr. BURG. Yes, so it—under—— 

Senator AYOTTE. If you’re a bad actor, do they even send the notices? 

Mr. BURG. I mean, there—there are, in our experience, many 

vendors that have a veneer of legitimacy, who will respond to subpoenas that we send out, who will say, yes, we got consent from 

everybody that we charged. But in fact, there’s no way of determining that. If it’s an online sign-up, for example, there’s no way 

of telling whether the data that was used to charge somebody on 

their phone bill came from the consumer or came from a data file 

109 

that was obtained in some other way, without any involvement of 

the consumer. 

So the prior law required these vendors to send a freestanding 

notice through the mail to consumers. Many of the vendors said, 

well, we didn’t send a letter through the mail, but we had clear notice on our website, so when the consumer signed up, the consumer 

knew that he or she was going to be billed on the local phone bill. 

But then, there’s no way of telling if the consumer signed up. 

And when we did our survey, and there was—this was not coupled with any promise of refunds or anything. I think people in— 

in our State tend to be pretty straightforward when they’re responding to this kind of inquiry. We had just the vast majority of 

people saying, I don’t know what you’re talking about, I didn’t give 

consent, I should not have been billed. 

Senator AYOTTE. Thank you. Mr. McCormick, I wanted to follow 

up with you. You had said, in your testimony, that with respect to 

third-party billing, it is valuable to some businesses and consumers. Can you provide us further information on how it is valuable? And if we were to ban the practice, what are your concerns 

about the consequences of it? 

Attorney General Madigan just said that she hasn’t had an experience where there have been legitimate charges, so I’m trying to 

understand, if you can help me, what your perspective is on any 

value to the consumer. 

Mr. MCCORMICK. Well, first of all, we would absolutely agree 

that it’s not convenient to have an unauthorized charge put on your 

telephone bill. In the case of Vermont, Mr. Burg testified that, although Vermont moved to ban third-party billing, even there, there 

were certain exceptions where it was believed to be convenient for 

the consumer to be able to have certain services aggregated on a 

single bill. 

So any kind of examination in this area, I think, would require 

some broad understanding of what legitimate businesses do rely 

upon this third-party billing as both a competitive opportunity and 

a consumer convenience. So we could try and provide you with 

more information for the record. 

Senator AYOTTE. I would appreciate that, because I think it’s important for us to understand if there are some legitimate purposes, 

what they would be and what are some examples given, the experience we’ve heard about today from General Madigan. Thank you. 

[The information referred to follows:] 

Response: Many consumers find it convenient to have their charges for communications-related services consolidated on one bill. Such services include local voice 

service, long distance service, Internet access, multi-channel video services, wireless, 

home security services, and services such as voice-mail and call-answering, call-forwarding, and teleconferencing. Such well-known companies as DirecTV, Dish Network, Verizon Wireless, AOL, EarthLink, Juno, NetZero, and online gaming providers such as Gaia Interactive and Blizzard Entertainment, which offers the popular ‘‘World of Warcraft’’ game, provide their services to many consumers by offering 

the convenience of third-party billing. In addition, the state of Vermont, in enacting 

anti-cramming legislation, provided the following exceptions from its general prohibition against third-party billing—presumably based upon its determination that 

they afforded an important consumer convenience: 

• Billing for goods or services marketed or sold by a company subject to the jurisdiction of the Vermont Public Service Board; 

110 

• Billing for direct dial or dial-around services initiated from the consumer’s telephone; 

• Operator-assisted calls, collect calls, and telephone services that facilitate communication to or from correctional center inmates. 

The CHAIRMAN. Thank you, Senator Ayotte. Senator McCaskill? 

STATEMENT OF HON. CLAIRE MCCASKILL, 

U.S. SENATOR FROM MISSOURI 

Senator MCCASKILL. Thank you, Mr. Chairman. Thank you all 

for being here today and welcome to you. I wanted—like to place 

on the record, Mr. Chairman, a letter that the Committee received 

from a company that is based in my state, O’Reilly Auto Parts. 

[The information referred to follows:] 

O’Reilly Auto Parts 

Springfield, MO 

www.oreillyauto.com 

June 28, 2011 

Hon. JOHN D. ROCKEFELLER IV, 

Chairman, 

U.S. Senate Committee on Commerce, Science, and Transportation, 

Washington, DC. 

Dear Chairman Rockefeller and Committee: 

We write this letter on behalf of O’Reilly Automotive Stores, Inc. The Company 

itself and through various subsidiary entities operates 3,613 auto parts stores in 39 

states with a network of 23 supporting distribution centers and 47,495 team members. The parent of O’Reilly Automotive Stores, Inc., O’Reilly Automotive, Inc. is 

publically traded on the NASDAQ as ‘‘ORLY.’’ 

Over the years, as our company has grown, we have encountered certain business 

practices by local exchange carriers commonly referred to as ‘‘cramming.’’ The extent 

of the problem is widespread. We estimate that at least 80 percent of our stores 

have been billed for some type of ‘‘cramming.’’ We believe these practices to be unethical, especially considering the business environment we have encountered when 

combating this practice. 

Of course, our discovery of this practice grew from a careful review of our billing 

records, not from any need for the services of any third party biller. As we began 

to understand the nature and scope of this problem in 2000 we determined because 

of the sheer number of lines the company leased and locations the company had, 

the only way to stay on top of the issues was to add employees. To assist our 

telecom manager with this task, in 2000 we hired a second dedicated team member, 

in 2008 we added a third, and as of October, 2008 the company has employed three 

(3) full-time and dedicated employees who do nothing but review and analyze local 

and long distance phone bills for this practice, as well as other erroneous charges, 

and seek refunds and/or credits. 

The analyst group and senior management of the company have long attempted 

meaningful communication with the carriers about this practice. As you might appreciate, the seemingly endless web of call centers and carrier customer service representatives made it nearly impossible to make progress. After dozens of conversations and endless frustration from our analyst group, we began to look for other 

ways of handling our requests for cancellation and credit related to this billing. One 

way was to document the charges in writing and fax our requests to call centers 

when we were able to get a fax number from a carrier representative. 

During our communications with the various carriers, we sought ways to block 

third party billing to our accounts. Some regional bell operating centers (RBOCs) 

were willing to find work arounds for this issue others insisted there was nothing 

they could do about it. We were however astounded and amazed when one of our 

billing analysts discovered a flyer in an envelope with one of the individual bills we 

received from one of the carriers who had insisted it was out of their hands. The 

flyer explained customers could now ‘‘block’’ third party billing. When we approached our assigned account team at the carrier with the flyer, they requested 

a copy and advised they would have to investigate. We have however followed consistently and persistently with them over a period of 2 years and are now able to 

111 

block third party billing from existing accounts. Of course, we believe our ability to 

do this is a direct result of our tenacity. 

The ability to block on existing account however has not allowed us to eradicate 

the practice of cramming. As a growing company, we frequently open new stores. 

Typically, we will open in excess of 150 new locations each year. Despite the fact 

we request a block on third party billing with each new order, we typically see third 

party charges on the first and or second month’s bill from this carrier. 

To give the Committee some idea of the pervasiveness of the problem, in 2004 our 

team tracked and received refunds totaling nearly $750,000 in erroneous charges 

billed through local exchange carriers. We estimate approximately 25 percent of the 

number of erroneous charges was the direct result of cramming. At the height of 

this problem, some 2 to 2 and one half years ago, a single team member requested 

over $3,000 in refunds for erroneous third party charges from AT&T alone, in only 

one geographic region of our company. When you consider the charges related to 

cramming are usually between $5 to $50 per bill, this example reflects somewhere 

between 60 and 600 erroneous charges for a single month in a single region. Based 

on the records we have kept, over the past 10 years, we have averaged about $1,250 

worth of these charges per month for O’Reilly. About one quarter of our dedicated 

teams’ time is spent finding, disputing, and recording the credit request and receipt 

progress. When we acquired CSK Auto in 2008 and began to audit their statements, 

we estimate they averaged $2,500 a month over this same period. 

Often, the carriers simply refer you to the third party biller or their third party 

clearinghouse. Often, they will attempt to persuade that someone within the company signed up for and authorized the services by phone or through the Internet. 

O’Reilly has consistently trained local store managers and communicated to carriers 

that local store managers lack the authorization to bind the corporation for these 

services. While we expect a team member to make a mistake from time to time, we 

believe our training is effective and view the continuation of cramming a purposeful 

decision on the part of carriers to circumvent communication to them regarding our 

corporate authority structure. In addition, our team members do not have store access to the Internet. It seems unlikely they would go home and sign up their store 

for any of these services. There have been times when recordings have been made 

to evidence the alleged purchase of services. While some calls sound legitimate, others, in our opinion do not. The carriers or clearinghouses cannot and/or do not ever 

produce any documentation purporting to actually be signed by an employee with 

any authority. One might only surmise that doing so results in a pecuniary benefit, 

not only to the crammers, but to the LEC’s. 

In summary, the company has and continues to spend its resources managing the 

issue of cramming with its providers and has done so for over 10 years now. During 

that time, the company estimates it has obtained refunds and credits for an approximate conservative estimate of $200,000 at O’Reilly for cramming alone. CSK Auto, 

Inc. was acquired in 2008 and did not have staff auditing or tracking of these erroneous charges. Based on the condition of their billing when that company was acquired and the audits our O’Reilly teams have done, I estimate they lost approximately $300,000 over the last ten (10) year period. Overall, third party charges 

billed to both companies is estimated at $550,000. Additionally, we estimate three 

full-time employees have spent roughly 26,000 hours solely on this issue at an additional overhead exposure of approximately $400,000. 

Whether the consumer is an individual or corporation, we view the practice of 

cramming as unethical and fraudulent. We ask the committee to recommend proposed legislative action to preclude this practice including an express statutory private right of action and include equitable and damage remedies as well as an attorney fee provision arid punitive damages based up on a finding that conduct is pervasive, egregious or outrageous. 

In addition to the forgoing, we attach exemplars of bills supporting the types of 

third party billing we receive. 

[Attachments to letter not included in the record.] 

Sincerely, 

JEANENE ASHER, 

Director of Telecommunications, 

O’Reilly Automotive Stores, Inc. 

Senator MCCASKILL. And it is quite a tale. For 10 years, O’Reilly, 

when they began realizing that they were being victimized by extensive cramming, began hiring people full time to do nothing but 

monitor their billings. They now have three full-time employees 

112 

that do nothing but monitor billings. And the experiences they’ve 

had with AT&T and others, frankly, are outrageous, how difficult 

it has been for them to curb this practice. 

They now estimate that the 10 years they’ve been tracking this, over $200,000 of billings have been tried, have been attempted 

against their company. They acquired another company just a few 

years ago and they’ve done the work on that company. They think 

they’ve lost $300,000, so $550,000 worth of cramming over a 10- 

year period, and they’re particularly victimized because they open 

new stores all the time, and their numbers are available to the 

public. 

And it’s these small businesses and these various new numbers, 

that—where these companies obviously are just feasting fraudulently on small businesses. And it is—it is—they’ve spent $400,000 

on their staff to do this over the 10-year period, but they’ve netted, 

you know, $150,000 or so as they look at what they’ve tried to do. 

Now, most companies don’t do this. Most companies just try to 

beat it out as they can. They try to do their best. So let me turn 

to you, Mr. McCormick. And I know that you are in an awkward 

position here because, unfortunately, my wrath is going to probably 

directed toward you, but we know each other, and I think you 

know I’m a nice person, and I don’t mean to be—to pick on you 

today, but I need to know how much money the phone companies 

are making on this, because they’re clearly making a boatload of 

money or they would not put up with this. They are allowing these 

people to use their platforms to bill because they’re getting a piece 

of the pie. I need to know. How much did AT&T make last year 

on cramming? 

Mr. MCCORMICK. Senator, I’ve been told that the revenues related to third-party billing are about one-tenth of 1 percent of overall industry revenues. I believe that—— 

Senator MCCASKILL. That doesn’t tell me how much it was—— 

Mr. MCCORMICK. I believe—— 

Senator MCCASKILL.—because I know how much—— 

Mr. MCCORMICK. I believe—— 

Senator MCCASKILL.—money AT&T is making. 

Mr. MCCORMICK.—I would have to provide you with the exact 

figure for the record, but I believe, based upon what I’ve learned 

from AT&T, that their revenues from third-party billing amount to 

about $50 million a year. 

Senator MCCASKILL. OK. So the total industry is making $50 

million a year off of it? 

Mr. MCCORMICK. Well, that would be AT&T. 

Senator MCCASKILL. AT&T is making—— 

Mr. MCCORMICK. Right. 

Senator MCCASKILL.—$50 million? 

Mr. MCCORMICK. But it—— 

Senator MCCASKILL. Well, that sounds like real money to me. 

Mr. MCCORMICK.—it’s $50 million for third-party billing. Now, I’m not saying that they make $50 million off of cramming. I’m saying that they make $50 million in fees off of performing the thirdparty billing service, and that overall, for the industry, it is somewhat less than an estimated $200 million. That would represent 

about one-tenth of 1 percent of industry revenues. 

113 

Senator MCCASKILL. It sounds like, to me, that it—that if—either 

you’re going to take the position it’s de minimis, and then the good 

reputations of these companies are being maligned in a way that 

I would think they would consider to be inappropriate, or it’s significant money and they’re willing to bear the burden of this bad 

practice that’s going on, because ultimately, it’s the consumers that 

are out there, fighting for their life on every $1.50 that they see 

on their phone bill. 

Let me ask you this. When my credit card is used, there are a 

lot of hoops that I’m expected to jump through to use my credit 

card online. I have to have my—the right billing address. And they 

have the ability to match up whether or not the billing address is 

correct. There’s a PIN number that is on my credit card, that I 

have to use, that tells the company that I actually have the credit 

card in my possession. 

Why don’t the phone companies require these third-party billers 

to get that kind of identification from these people? 

Mr. MCCORMICK. Senator, the companies have contracts with the 

third-party aggregators that require the aggregator not only to authenticate the service provider, but to require that the service provider provide authentication of the actual authorization of the 

charge. So those contractual commitments are in place. 

The telephone companies actually audit those third-party 

aggregators, but nevertheless, this remains a very significant problem, as the Committee staff report itself found. After three million 

pages of evidence, it’s very difficult to tell what are and are not authorized charges. 

Senator MCCASKILL. But the—there’s not a requirement that you 

give the company that wants to bill—you get a self-identifying 

number for your phone account from you. There’s nothing there 

now for that. If somebody calls my house, and my grandchild answers the phone, and they say, do you want to spend $2 a month 

to get TV listings in your area delivered to your Internet account 

or whatever, and my grandson just hangs up the phone, they could 

start doing that because they can say they’ve called, and somehow 

they got authorized. 

I mean, that’s what they’re doing. Some of them don’t even bother to call. Why don’t these phone companies say, you have to 

produce—from the person that authorizes these services, they have 

to produce to you a PIN number that has to match. 

Mr. MCCORMICK. That may be a very good idea. It’s my understanding that the way in which they require authentication today 

is through three specific methods. One is true actual recordings of 

the individual when they’re called, and that they authorized the 

service. 

Number two is through—if it’s done on the Internet through double-click methods, and number three through the delivery of welcome packages that are then accepted. They don’t use PIN numbers 

like they do with credit cards, but they do have industry standards 

with regard to authentication. 

Senator MCCASKILL. Well, I think that, you know, two of those 

three are very easy to do fraudulently. And frankly, the O’Reilly 

folks tell me that they’ve listened to some of the recordings, and 

that they sound about as legit as some of the rhetoric that’s flying 

114 

around the capital right now. It—you know, it is—it—you know, I 

don’t think that the recordings are even foolproof and it seems to 

me this would be a very simple way. Obviously, it has worked for 

credit cards. 

And what you would do is, when you got a phone line, you would 

get a PIN number with it, and before someone could begin charging 

your phone number, they would have to be able to produce that 

PIN number. And I know I’m not giving my PIN number out on 

anything unless it’s something I want. It seems like, to me, that 

would clean it up pretty quickly and you all could do that on your 

own without the government getting involved. 

Would you mind taking it to your association and finding out 

what the problem would be with them providing PIN numbers to 

phone numbers so that the PIN number would have to be used if 

somebody wanted a third-party billing? 

Mr. MCCORMICK. I absolutely will. 

Senator MCCASKILL. OK. That’s great. How many third-party 

vendors have been disqualified from the—and this will be my last 

question. I know I’m over time. How many third-party vendors, are 

you aware, has AT&T disqualified from using their customer’s 

phone numbers? 

Mr. MCCORMICK. I don’t have a specific number. 

Senator MCCASKILL. That would be great to find out. 

Mr. MCCORMICK. But I can just get that for the record. 

[The information referred to follows:] 

Response: 

• AT&T revenues for 2010 were $78 million. The projected revenues for 2011 are 

less than $50 million. 

• AT&T bills for about 550 third party service providers in each of its regions, 

except for its East region where it bills for about 220 service providers. 

• AT&T disqualified 45 service providers in 2010 and 65 in 2011. The company 

also terminated one billing aggregator in 2011 and suspended one aggregator 

in 2010 in the SE region. Since 2010, AT&T has received 329 new service provider applications, approximately 200 of which were disqualified by AT&T. 

Response: As an industry, we continuously strive to improve the customer experience and to look for the best way to balance the customer’s desire for the convenience that third-party billing provides with appropriate steps to prevent unauthorized third-party billing that do not overly burden the customer. Our Board of Directors is open to considering appropriate, additional safeguards, and requiring a merchant or billing aggregator to obtain an additional ‘‘check off’’ from a customer is 

an idea that we believe merits further consideration. In this regard, a mandatory 

PIN for authentication is one option, but there could be others, as well, that might 

better balance the customer’s desire for convenience with added protection. PIN authentication has sometimes proven to be cumbersome and frustrating for customers 

because of lost and forgotten PINs and other customer-related confusion. PINs can 

also pose operational challenges. For example, the use of PINs would not control 

issues such as fraudulent marketing, or cramming of additional unauthorized 

charges after a merchant or billing aggregator initially obtains a customer’s PIN. 

Senator MCCASKILL. I’d like to know how many total third-party 

vendors AT&T has a contract with. And I’m picking on AT&T because they’re the biggest and have the most resources to, in fact, 

shut this kind of stuff down. And according to O’Reilly, they’ve 

been very difficult. In some parts of the country, they still can’t 

block with AT&T. So I would like to find out from—for AT&T, how 

many—how many third-party vendors they have total and how 

many they’ve disqualified annually for the last 5 years. Thank you. 

115 

Mr. MCCORMICK. Thank you—— 

Senator MCCASKILL. Thank you very much, Walter. 

Mr. MCCORMICK.—for—— 

Senator MCCASKILL. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

Senator Boozman? 

Senator BOOZMAN. I’ll defer to Senator Udall, if he has some—— 

Senator UDALL. You—— 

Senator BOOZMAN.—with your permission. 

Senator UDALL. You sure? I think he’s—— 

The CHAIRMAN. No, actually, you’re—go ahead. You’re next. 

STATEMENT OF HON. TOM UDALL, 

U.S. SENATOR FROM NEW MEXICO 

Senator UDALL. OK. Thank you, Senator Boozman, and Chairman Rockefeller. Thank you very much. Once again, you are steering us in the right direction, in terms of consumer protection, and 

focusing on this hearing, and I very, very much appreciate it. And 

I appreciate the fact that you have an Attorney General, and an 

Assistant Attorney General here. 

I know that Senator Ayotte was very aggressive in her state, and 

I know that the both of you are very aggressive in terms of stopping these kinds of scams, and we very much, very much, appreciate your presence here today because I think you bring a—bring 

a very important perspective. 

And I understand, from your testimonies, that almost all consumers who were crammed were unaware of the charges and did 

not want or use the advertised services. And I think you both recommend the prohibition of third-party charges to landline phones. 

The other concern that I have and I—when we get the innovation 

and the new uses and we have the cell phones going, is looking at 

cell phones and looking at what’s happening there. 

And I wonder, do you have any recommendations on how to prevent a problem of this scale, which we’re talking about a loss on 

landline, $2 billion or more. What can we do, as far as cell phones, 

affecting third-party billing on cell phones? 

Ms. MADIGAN. Well—— 

Senator UDALL. What is your recommendation? 

Ms. MADIGAN.—first of all, let me give you perspectives, Senator, 

on the overall complaint. 

Senator UDALL. All right. 

Ms. MADIGAN. According to FCC data, it appears that about, you 

know, 82 percent of the complaints regarding the landline—16 percent of them are wireless lines. In the State of Illinois, in the Attorney General’s office, we’ve seen very few complaints regarding 

wireless lines. Our belief is that the wireless carriers are much 

more vigilant and intolerant of third-party billing. And they’ve 

been very aggressive in ensuring that those bills are clean and that 

they maintain their good reputation. 

And so, again, we—I would—would pose that if you ban that opportunity, you will prevent that fraud from migrating from the 

landline bills to the wireless bills. Many people, at this point, are 

starting to rely exclusively on wireless service as opposed to 

landline service. And so your concern is a good one. 

116 

What I would tell you is that we haven’t seen the problem, at 

this point, at the level that it exists at the landlines. But it certainly has that opportunity if we don’t just cut it off entirely. 

Senator UDALL. Mr. Burg, do you have any thoughts? 

Mr. BURG. Senator, the one thought I have is that I think it’s important, once again, to look at the issue of consumer expectations 

and whether—in terms of how you can be billed, and for what, and 

to see if those expectations are the same in the wireless environment as in the landline environment. It may be that, because of the 

availability of various wireless-related services, apps, and ringtones, and those kinds of things, that can be billed to your wireless 

account, that people expect to be billed in that way, that an outright prohibition would not be the right way to go. 

There are other options. You could have a blocking system. It 

could be an automatic block when you open a wireless account and 

then you opt out of that, which would protect the broad public and 

those people who want to be billed for a whole range of things on 

their cell phone account—they can do that. 

Senator UDALL. Do any other of the panels have any thoughts on 

this issue that I’ve raised here? 

Mr. SPOFFORD. So related to wireless, Senator? 

Senator UDALL. Yes. 

Mr. SPOFFORD. Yes, our—our company actually has a service out 

now which allows people to upload a—a phone bill and detect these 

third-party charges. And we are seeing an increase on the wireless 

side. It is nowhere near as bad a problem yet, but due to the legitimacy of many third-party charges on wireless bills, apps, movies, 

songs you have, et cetera, et cetera, for smart devices, it’s going to 

be a really tough challenge to determine what’s legitimate and illegitimate. 

We do that, based on actual hard research of every line item 

charge, so that we can then catalog the bad ones and inform our 

customers about it. But you know, a broad prohibition on it would 

be difficult, but it’s coming and it’s going to get—it’s going to get 

much worse on wireless. And I don’t think any legislation on the 

wireless side is going to affect wireless, actually. 

Senator UDALL. Ms. Eppley? Thank you, Senator Rockefeller, and 

I’d also ask consent to put my opening statement into the record. 

The CHAIRMAN. Absolutely. 

[The prepared statement of Senator Udall follows:] 

PREPARED STATEMENT OF HON. TOM UDALL, U.S. SENATOR FROM NEW MEXICO

I want to thank you, Chairman Rockefeller, for this hearing today and for your 

leadership in consumer protection. 

I was shocked to learn from the investigation and report on ‘‘cramming’’ that this 

widespread problem has potentially cost Americans billions of dollars of unauthorized charges on their landline telephone bills. Cramming has affected too many New 

Mexican families, small businesses, nonprofits, and even community health centers. 

I look forward to hearing from our panel on how cramming can be stopped. 

I also want to raise the issue of cramming on cell phone bills. Americans today 

have over 300 million mobile phones, and consumers increasingly use these phones 

to make purchases similar to a credit card. News reports highlight an increase in 

scams that place unauthorized monthly charges on consumers’ cell phone bills, leading to ‘‘bill shock.’’ A constituent from Santa Fe contacted me after discovering $170 

of fraudulent, unauthorized premium text message charges for a trivia game he did 

not want and did not sign up for. 

117 

I was not surprised to learn that the founders of the company billing him were 

previously involved in a class action lawsuit for a separate landline cramming scam. 

The wireless phone company involved did eventually provide a full refund in this 

case. However, this constituent’s concern was that he was probably just one of many 

people who had been similarly scammed. He told me: ‘‘My main goal [is] to get this 

practice stopped. It was nice to get the money back, but the bigger deal by far is 

to put these scams out of business.’’ 

So, I want to thank you again, Chairman Rockefeller, and the witnesses who are 

here today. It is good to see a state attorney general and assistant attorney general 

here with us today. They have experience on the ground fighting this type of fraud. 

I know from my days as attorney general that legitimate companies are happy when 

fraudsters are shut down. That’s because a good business wants a bad business, out 

of business. 

Senator UDALL. Thank you. 

STATEMENT OF HON. JOHN BOOZMAN, 

U.S. SENATOR FROM ARKANSAS 

Senator BOOZMAN. So I really don’t have any questions, Mr. 

Chairman. I appreciate you holding the hearing, and the Ranking 

Member being here, and participating. This is a problem that I 

think is going to continue to grow. And it’s not just this area. 

I know my daughter was telling me the other day—she’s a realtor and she had somebody call and say, would you like to increase 

your sales and your visibility throughout the country? And she said 

yes, I’d very much like to do that. Well, they took the yes. They 

were recording it, and took that yes, I’d very much like to do that, 

and then used that as a justification to add about a hundred dollars a month. I mean, it was very substantial. 

So I think that there are just all of these areas, and certainly, 

wireless is important. I think, in Arkansas, we’re 70 percent wireless at this point, something like that, something very dramatic. 

And you know, as you see that, especially in young people, they 

just don’t have landlines. So it really does all go together and I 

think it’s really important that we discuss it. And you know, we’ve 

got a lot of differences of opinion from the panel and the panel is 

excellent. 

We appreciate your being here, and sharing your insights, and 

many of you, all of you, being on the front lines, really fighting the 

battle in your own way. I know that the law enforcement—they 

don’t want to see it happen. I know that our phone companies don’t 

want to see it happen also. 

The key is, how do you do it in a reasonable way. So thanks 

again, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. It’s interesting to me. We 

have to wind up. It’s interesting to me that AT&T itself has been 

crammed some 80 times. And I guess my question to you, Mr. 

McCormick, is, you—you’re—I mean, I think there’s total agreement on this panel, except for you and you’re trying to sort of slide 

it off as happens. But if AT&T itself is being crammed 80 times 

and they probably don’t know about it—but on the other hand, how 

can they not know about it? Because they have really good auditors, and bill counters, and bean counters, and they’re bound to 

find them. 

Why don’t we just take a simple thing, and put all of our agony 

at an end here, try to somehow protect authorized charges, but just 

get rid of all the rest? Why wouldn’t we do that? There’s just milVerDate Nov 24 2008 08:45 Dec 15, 2011 Jkt 071640 PO 00000 Frm 00121 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\71640.TXT SCOM1 PsN: JACKIE
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lions of sleepless hours for millions of Susan Eppleys. Why go 

through all the tomfoolery of hedging bets? 

Or is this really clear? What really is clear ought to be a monumental embarrassment just to the telephone companies that we’ve 

done. And we’re going to persist on this because that’s what we do 

here. We protect consumers. We’ve got a lot of other things, but we 

protect consumers. Why wouldn’t—why wouldn’t we just ban that, 

so you wouldn’t have to sort of compromise yourself so much as a 

witness? 

Mr. MCCORMICK. Mr. Chairman, as you know, in Vermont, with 

some limited exceptions, the industry supported that legislation. 

This business of third-party billing represents, as I said, less than 

one-tenth of 1 percent of all—— 

The CHAIRMAN. I don’t care. You’ve said that—you see, don’t you 

understand—— 

Mr. MCCORMICK. So—— 

The CHAIRMAN.—what—how misleading that is? The point is, it 

doesn’t to Susan Eppley. It doesn’t to hundreds, hundreds of thousands of other citizens all across the United States, every single 

year for years, and years, and years, and years. So don’t give me, 

it represents one-half of one—that’s the corporate point of view. So 

why do you use it? Why don’t you think about her, rather than 

about one-half of 1 percent, which I don’t necessarily agree with? 

Why not ban it, ban the unauthorized billings, give America a reason to wake up with a smile? 

Mr. MCCORMICK. Well—— 

The CHAIRMAN. Don’t embarrass the phone companies and all 

the others that we’re going to be investigating, too. Why not? 

Mr. MCCORMICK. Well, Mr. Chairman, we do ban all unauthorized billings. With regard to banning all third-party billings whatsoever, that’s something, as a policy, I’ll explore with the industry, 

to see if that’s something the industry would like to support. 

The CHAIRMAN. OK. I’ll turn to Senator Ayotte, to ask the final 

question, if she wants to, and then I’ll have a closing statement, 

the last 15 seconds. 

Senator AYOTTE. Thank you, Mr. Chairman. And just as a followup, Mr. McCormick, I appreciate your willingness to speak with 

your industry colleagues, and I look forward to your supplement to 

the question I asked you so that we can have a better understanding of the full consequences of doing so for consumers, as well 

as businesses. 

Attorney General Madigan, Illinois passed a cramming law in 

2009, which does not have the complete ban on third-party billing. 

So can you help us understand? You’re here asking us to do a complete ban on third-party billing. What hasn’t worked in your law? 

And what has brought you to this position today? 

Ms. MADIGAN. Senator, as I mentioned, when we’ve brought our 

lawsuits, all 30 of them, we’ve used our Consumer Fraud Act. Even 

though that new law has been passed, we have yet to use it. 

The reason that we’re here today is, we would like to be more 

like Vermont because Vermont has been successful in being able to 

pass an outright ban and it is insane that we have to spend countless hours, I mean, in a slightly similar way to what Ms. Eppley 

does. We take in hundreds of complaints. We file a lawsuit, eventuVerDate Nov 24 2008 08:45 Dec 15, 2011 Jkt 071640 PO 00000 Frm 00122 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\71640.TXT SCOM1 PsN: JACKIE
119 

ally, after we do a thorough investigation, and then, you know, we 

get restitution for, you know, many of those consumers, but not 

nearly all of those consumers. 

Response: We share the Committee’s desire to stop unscrupulous merchants from 

bilking our customers by charging them for goods and services they have not actually and knowingly purchased, and we support our customers’ right to be fully informed about what they are being billed for. As the Committee is aware, on July 

12, 2011 the FCC issued a Notice of Proposed Rulemaking seeking comment on additional steps it is considering to further curb cramming and to protect consumers 

of both wireline and wireless carriers. Several of the steps the FCC proposes are 

interesting and deserving of full consideration, which the industry looks forward to 

providing. We hope to engage in a constructive dialogue with the FCC in the context 

of the NPRM. 

We believe the best course here would be to allow the FCC, as the agency of expertise, to complete its rulemaking process before Congress decides whether additional statutory mandates are necessary. But if the Committee proceeds to consider 

legislation in advance of FCC action, we would urge that any proposed legislation 

focus narrowly on preventing unauthorized charges while recognizing that some 

services provided to end users through third party billing (e.g., wireless, DSL, video, 

satellite, and calls originating from within correctional facilities) provide a valuable 

service to consumers. To that end, the industry has formed a working group to examine current practices and to discuss potential legislative and regulatory measures 

intended to further protect against unauthorized charges while balancing customer 

convenience and harm to legitimate businesses. The testimony of Vermont Assistant 

Attorney General Burg about his state’s new statute described what could be a useful model for Federal legislation, and the industry working group will consider the 

Vermont law and other possible approaches in our effort to assist the Committee 

in pursuing the best approaches to protect our customers from being charged for 

goods or services they did not consent to purchasing. 

What we have seen repeatedly, and—and what you’ve heard everyone testify to today is that consumers don’t know that their 

phone bill can be used like a credit card account. Consumers end 

up with services and products crammed on their phone bill they 

never asked for, and ultimately, because they never asked for 

them, they never knew they were paying for them, and they never 

used them. 

The way to eliminate that, without having to go through, you 

know, the heroic efforts of most people on this panel, is to simply 

ban these third-party charges. And yes, there are some exceptions, 

you know—operator assistance, dial-around services. There are certain things that—that everybody knows what those exceptions are. 

Those are things that individual consumers or businesses, if they 

want, affirmatively ask to be put on their bill. 

It is not some secret mystery that ends up crammed onto their 

bill, when all they’ve done is—you know, put their name, their address, and their telephone number into an online solicitation to get 

coupons. And that seems to be the way that many people, at least 

on the Internet, end up being charged for these things, if they were 

on the Internet at all, if it wasn’t just outright fraud. So because 

of the enormous level of fraud and deception that really, I would 

say, is—is the entire industry here, it should just be banned outright. 

Senator AYOTTE. And as one final follow-up to Mr. McCormick, 

if an industry is having to follow a whole host of different State 

laws in this area, say, you’ve got to follow the law that Illinois 

passed, I assume this is what you’re dealing with. You don’t have 

preemption in this area. 

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As this committee draws its conclusions from Chairman Rockefeller’s report, what is your industry’s view on having one Federal 

standard, whether it’s the banning of third-party or some other solution? Senator McCaskill raised one here. What’s your perspective 

on that? 

Mr. MCCORMICK. Senator, this is primarily a national business 

and as these issues have come up, we really have been looking to 

the FTC as the principal regulatory agency. So it’s a great benefit 

to our industry to have a single mission-like standard. 

The CHAIRMAN. OK. 

Senator AYOTTE. Again, I have to ask the Attorney General—if 

you have any preemption concerns here, if we come up with a solution? 

Ms. MADIGAN. We always have preemption concerns at the State 

level and I think there was somebody who—who kindly mentioned 

the fact that, you know, you would want to make sure—and I think 

it was you—that, you know, while the Federal regulators had authority to do whatever they needed to do against cramming, that 

the States are not stripped of that authority, because far too frequently, unfortunately, we find that when the solution is one at the 

Federal level and the States are preempted, it oftentimes is not 

strong enough for us to contend with the on-the-ground problems 

that we have in the States. 

Senator AYOTTE. Thank you. 

The CHAIRMAN. Let me just close by a couple things: one, thanking all of you very much for being here on what I think is a classic 

American problem. I mean, we’re not talking about the war in Afghanistan here. We’re not talking about raising the debt ceiling. I 

grant that. But we are talking about something which is profoundly troubling and disturbing to millions of Americans. And it’s 

also unnecessary. 

I mean, I thought what we were meant to do is try to clear up 

problems here and 10 years ago, the telephone industry came to us 

and said, we’ll clear up the problems because they really make us 

look bad if we don’t, and therefore, you can trust us to do it. And 

they didn’t. 

So all I’m saying is that we’re going to stick with this. You know, 

the FCC stated yesterday that it’s now seeking comment on whether a ban to third-party billing, you know, that—I appreciate that 

and they settle things. They have—don’t they have some settlements, the FTC? But that’s all stuff that’s already done and it also 

is an admission of guilt. I mean, if you settle something, to me, it’s 

an admission of guilt. I’m not a lawyer. Attorney General Madigan, 

I want you to know that. But that’s the way I read it. 

So anyway, in the near future, I plan to introduce, working with 

colleagues from both sides of the aisle, legislation that will put a 

stop to this, because I simply cannot find any grain of sense in us 

having to have a hearing like this and have all the Susan 

Eppleys—Mr. Spofford, you haven’t got enough of the spotlight. But 

you know, Susan Eppley’s just better looking than you are. That’s 

all. 

Mr. SPOFFORD. No argument. 

The CHAIRMAN. You know. But I mean, why put her through 

that, and the millions of others? Why put people through that? It 

121 

doesn’t make any sense. It isn’t going to change the future of the 

nation, but it’s going to change a whole lot of household functioning 

and ability to survive in truly horrible economic times, which are 

going to be with us for quite some time—would be my guess. 

So I don’t think we should mess around with this. Let’s not 

worry about whether something is convenient or not or whether 

something’s a quarter of 1 percent or not. Let’s just—let’s say, if 

there are certain authorized things that are—that should be done, 

let’s work on that, and figure that out, and then take the rest, and 

just ban it. So with that neutral statement, this hearing is adjourned. 

[Whereupon, at 12:03 p.m., the hearing was adjourned.] 

(123) 

A P P E N D I X 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. AMY KLOBUCHAR TO

LISA MADIGAN

Question 1. The Commerce Committee’s investigation and the FCC’s new proposed 

rules focus mostly on wireline cramming. You testified that approximately 16 percent of cramming complaints are filed to dispute wireless bill charges. Do you think 

we need better rules to protect wireless consumers from being crammed? 

Answer. I was reciting a statistic from a recent FCC release in which the FCC 

indicates that 16 percent of its phone bill cramming consumer complaints pertain 

to wireless phone bill cramming. 

As we move toward using our wireless devices as payment mechanisms and this 

type of billing mechanism begins to take root, I think the area of third party billing 

on wireless phone bills needs to be studied further to determine whether consumers 

are being adequately protected from cramming on their wireless phone bills. 

Question 2. Cramming takes some technical know-how and a willingness to engage in clearly fraudulent practices. Is there evidence from your investigations that 

some of these offenders may be tied to organized criminal networks, or are they 

mostly operating on their own? 

Answer. My investigations have not revealed whether or not the defendants are 

tied to organized criminal networks. 

Question 3. You have advocated for better billing practices and successfully championed passage of an Illinois law in 2009 that includes the very important requirement that a third party cannot charge a consumer until consumer consent is verified 

by the telephone service provider before any charges are billed. What do you consider to be the most effective parts of this legislation? How do the new laws affect 

the number and severity of cramming crimes and abuses? In your experience, did 

this law lead service providers to drastically change their disclosure practices? 

Answer. My office did not draft or push for the law. Rather, upon request, I 

helped shape the final legislative language after the framework for the bill had already been established by the sponsor and stakeholders. It was a compromise piece 

of legislation that did not go as far as I would have liked. 

The Office of the Illinois Attorney General has brought successful enforcement actions against phone bill crammers using the general language in Section 2 of the 

Illinois Consumer Fraud and Deceptive Business Practices Act. The lawsuits basically allege that vendors have placed unauthorized charges on consumers’ phone 

bills, and that it is an unfair and deceptive practice to do so. The basis for the 

claims of unauthorized charges is that the sales pitches are deceptive, and that if 

any attempt is made to verify the order, it is inadequate, because it fails to demonstrate that the phone bill subscriber knowingly authorized a purchase to be billed 

to his or her telephone bill. My office’s investigations routinely reveal a low level 

of customer awareness of the charges and a high refund rate among customers who 

have become aware of the charges. 

815 ILCS 505/2HHH, effective in 2009, provided specific guidance as to what authorization and verification must be completed in order to have a legitimate sale to 

be billed on the phone bill. 

It does not appear that the new law has caused service providers to change their 

stated procedures. The billing aggregators and carriers have claimed for over a 

dozen years now that they have procedures in place to protect against phone bill 

cramming, including the procedures required by Section 2HHH. 

Question 4. In your experience, are U.S. Telecom’s ‘‘Best Practices’’ guidelines sufficient to combat cramming or are legal protections necessary? 

Answer. The industry best practices do contain some steps that can be helpful to 

detect fraud, but they are not sufficient to combat cramming. As I referenced in my 

oral and written testimony, my experience indicates that, although the billing 

aggregators and the LECs may request the marketing materials their clients use, 

124 

no substantive review of the marketing materials or marketing methods is taking 

place. 

Other aspects of the best practices, such as searching for cramming complaints 

or whether the named president of the company has engaged in cramming before, 

are unlikely to yield any significant results, as it is quite simple for a company to 

dissolve and resurface with a new company name, address, and named president 

while retaining substantially the same products and sales practices. 

The bottom line is that my investigations uniformly reveal numerous consumers 

who do not even know they are being billed on their phone bills for third party products or services. If they do discover these charges, they seek refunds and bill credits 

because they do not want or use these products and did not authorize their purchase. It could be that the best practices are ineffective, or that they are not being 

enforced, but my experience has been that they are not sufficient to combat phone 

bill cramming. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. MARK PRYOR TO

LISA MADIGAN

Question 1. Do you believe Federal legislation regarding cramming is needed? 

What provisions would you advocate that potential legislation include and why? 

Question 2. You are an advocate for a ban on third party billing on telephone bills. 

Can you explain how you arrived at this course of action? 

Question 3. Do you believe there are legitimate uses of third party billing that 

should be exempted from a comprehensive ban? If so, what are they? 

Question 4. How best can we separate the good actors in this market who play 

by the rules from the bad actors that do not? 

Answer. My oral and written testimony call for federal or state legislation banning third party billing, with certain appropriate exceptions for regulated services 

such as operator-assisted calls and long distance calls. 

My office’s experience over the last 15 years or so is that third party vendors just 

haven’t gotten it right, many times employing fraudulent marketing practices that 

do not apprise consumers that t hey are making a purchasing decision. On top of 

that, they peddle products and services that no one wants or uses. The billing 

aggregators and LECs have failed to come up with any meaningful efforts to correct 

the vendors’ practices. 

Phone bill cramming will not stop until third party billing stops. I recognize that 

some exemptions may be appropriate for products and services that are regulated 

by the Illinois Commerce Commission and/or the Federal Communications Commission, such as operator assisted calls, long distance service, and dial around services, 

and the ban that I call for would allow for appropriate exemptions. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. KELLY AYOTTE TO

LISA MADIGAN

Question 1. Attorney General Madigan, what are the penalties under Federal law 

for conducting cramming operations? What are the success rates for prosecuting 

crammers and do you have the resources and manpower to go beyond the low-hanging fruit. Is prosecution and effective option for smaller actors as well as the larger 

operations? 

Answer. Under certain circumstances, the Federal Trade Commission has authority to request civil penalties in its actions in Federal court, which can bring up to 

$16,000 per violation. 

Despite the numerous law enforcement actions against crammers by my office, the 

FTC, and other states, cramming continues. Although individual law enforcement 

actions may be successful in removing a specific vendor from the market, any number of similar vendors can and do reappear in the same space. 

It simply is not a good use of limited law enforcement resources to continue to 

file cramming cases against individual vendors for billing consumers on their phone 

bills for products and services no one wants, never uses, and never agreed to purchase, let alone be billed for on their phone bill. 

Even after questions have been raised publicly about whether third party billing 

has any legitimate uses, no one from the billing or vendor industry has come forward to provide examples of products and services that consumers both want, and 

want to be billed for via their landline telephone bill. 

Phone bill cramming will not disappear until third party billing disappears. 

125 

Question 2. Attorney General Madigan, Illinois passed a law to address cramming 

in 2009 that was not a complete ban. You wholeheartedly supported this ban at the 

time, but are now suggested we need a complete ban. Is the 2009 law not working? 

Where is it lacking? 

Answer. Upon request, I helped shape the final legislative language after the 

framework for the bill had already been established by the sponsor and stakeholders. It was a compromise piece of legislation that did not go as far as I would 

have liked. 

Basic consumer law and advertising law principles in place for dozens of years 

require clear and conspicuous disclosure of material terms and conditions of a seller’s offer, followed by explicit acceptance of the offer. This legislation merely codifies 

and provides a few specifics to what already was the law. My office brought numerous law enforcement actions before the legislation became effective by using the general consumer protection authority in the Consumer Fraud and Deceptive Business 

Practices Act. 

The lawsuits typically allege that consumers were billed for products or services 

they did not want, did not use, and did not agree to buy or be billed for on their 

phone bills. These billings occurred as a result of deceptive (and in some cases, nonexistent) sales pitches. 

It is my opinion that the 2009 law has had no effect on phone bill cramming. 

Question 3. Attorney General Madigan, what more can be done to educate the consumer about the existence of these charges, to keep a close eye on monthly telephone statements, and know where to complain to be removed any unauthorized 

charges on their bill? 

Answer. My office does try to educate consumers to read their monthly telephone 

statements and to contact my office for assistance with removing unauthorized 

charges. Phone bills provide the name, and often a phone number, for third parties 

whose charges appear on the phone bill. 

In addition, my Office’s outreach bureau provides consumer tips on avoiding and 

detecting phone bill cramming, and we are highlighting phone bill cramming in my 

office’s booth at the Illinois State Fair. 

Even though consumer education is an important preventative tool, frankly, consumers should not have to constantly police their phone bills from a barrage of 

fraudulent charges and try to figure out how to have them removed. The fraudulent 

charges should not be on the bill in the first place, and the LECs and the billing 

aggregators have failed to stop phone bill cramming despite their efforts over more 

than a dozen years. 

Question 4. Attorney General Madigan, According to your testimony, the ‘‘only 

piece of information’’ that vendors have to provide to billing aggregators to process 

a transaction is ‘‘the consumer’s telephone number.’’ However, after reviewing some 

of the comments filed at the recent FTC Workshop on cramming, some LECs require that: 

• The customer must provide explicit consent to the purchase and to have the 

service billed to the customer’s telephone bill. 

• The customer’s authorization must be documented by either (a) a written document signed and dated by the customer (or an electronic confirmation that is 

valid under the law of the state in which the customer resides); or (b) a recorded 

verbal authorization by the customer, which must be obtained by an independent third-party. 

• For Internet-based transactions, in addition to the above, the following information must be obtained from the customer: 

a. First and last name; 

b. Billing Telephone Number (‘‘BTN’’); 

c. Address, including street, city, state and zip code; 

d. Confirmation of legal age and authority to bill to telephone account; and 

e. Some form of ‘‘non-public’’ information, such as date of birth or last four 

digits of Social Security Number. 

f. The clearinghouse or an independent provider must then verify the accuracy of the customer’s information using ‘‘an established and reputable database provider’’ (e.g., LEXIS, Experian). 

Are these requirements helpful? Are the LECs in Illinois implementing similar requirements? If so, is the problem that the vendors are gaming the requirements or 

that the LECs aren’t sufficiently policing compliance and/or auditing submissions? 

126 

Answer. Technically, all that one needs is the billing telephone number. That is 

what the billing aggregator transmits to the LEC to effectuate the billing. 

The LECs say they follow various procedures to check out potential customers before allowing them onto the billing platform and have various rules about marketing 

that its clients are required to follow. Some of the LECs’ procedures and rules are 

relatively new, implemented as recently as 2010. 

The overarching problem of deceptive sales pitches remains. Consumers do not 

understand they are making a purchasing decision, or that they will be billed on 

their telephone bill. 

If someone thinks he is filling out an entry form for a chance to win a flat screen 

TV or a DVD player, he provides certain information for that purpose, including the 

information the LECs say they require. If a small business owner or not for profit 

company or church, or a receptionist who works for one of these entities answers 

the phone and accepts what he thinks is an offer for a free yellow pages listing, or 

an update to an existing yellow pages listing, or to receive written information about 

an offer, he is going to be willing to provide some contact information for that purpose. All of these scenarios involve obtaining the required information from someone 

who, because of a deceptive sales pitch, has no idea that he is making a purchasing 

decision, much less authorizing billing on his phone bill. 

As for verifying the name, address, and phone number through LEXIS or a similar service, that may serve to cut back on specific types of cramming. For example, 

where someone (someone who works for the vendor, or a lead generator for the vendor) submits to the vendor a name, telephone number, and address that are completely fabricated, running the order through a LEXIS-type service may help identify these orders as fraudulent because the name, address, and telephone number 

may not match up. Those non-matching orders can be rejected. However, if the vendor or lead generator has access to any public record data base, of which there are 

many, it can falsify orders easily with matching information that would not be detected by running them through LEXIS. 

As for the requirement to obtain explicit consent and documentation of that consent, my experience is that requirement is not meaningfully implemented or policed. 

As I indicated in my testimony, I have seen numerous deceptive sales pitches disseminated via a variety of marketing methods. 

The LECs and the billing aggregators both claim to review marketing materials, 

but as I indicated, based on investigations that my office has done, it does not appear that any real review is taking place. I have requested marketing materials 

from billing aggregators for specific vendors, and have found deceptive telemarketing scripts and Internet sign up portals that aren’t even actually used for 

customer sign up. The billing aggregator in some cases does not seem to know what 

the sign up page looks like online or have screen shots. 

On top of suspicious marketing materials, it does not appear that anyone is checking to see whether vendors are marketing as they represented, or whether the actual sales pitches as implemented follow basic consumer and advertising law principles of disclosing material terms and conditions clearly and conspicuously. 

As I stated in my testimony, deceptive sales pitches for products and services that 

no one wants or agreed to pay for at all, let alone via his telephone bill, have been 

occurring for over a dozen years. No set of best practices has fixed it, and no amount 

of law enforcement suits can fix it. This problem will not go away until LEC billing 

goes away. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. AMY KLOBUCHAR TO

ELLIOT BURG

Question 1. In your testimony you mentioned that wireless anti-cramming rules 

would differ from those intended to combat wireline cramming. One potential measure you suggested was an automatic block on third party charges that consumers 

could opt out of if they so choose. Do you think we need better rules to protect wireless consumers from being crammed? 

Answer. In a word, yes. Third party billing on wireless telephone bills is a largely 

unregulated area of commerce in a growing market; and despite the fact that at 

present, most cramming complaints concern landline bills, a not insignificant percentage of cramming complaints arise in the wireless sector. 

For example, the Federal Communications Commission (‘‘FCC’’) has reported that 

16 percent of the cramming complaints it received in 2008–2010 involved wireless 

127 

1FCC, Notice of Proposed Rulemaking, In the Matter of Empowering Consumers to Prevent 

and Detect Billing for Unauthorized Charges (‘‘Cramming’’) (CG Docket No. 11–116), Consumer 

Information and Disclosure (CG Docket No. 09–158), and Truth-in-Billing and Billing Format 

(CC Docket No. 98–170) (‘‘FCC NPRM’’), at 4 n. 11 (July 12, 2011). 2 Id. 3 Id. at 12. 4 E-mail from Keith P. Vanden Dooren, Special Counsel, Office of the Florida Attorney General, Economic Crime Division (Aug. 9, 2011). 5Senate Committee on Commerce, Science, and Transportation, Office of Oversight and Investigations, Majority Staff Report for Chairman Rockefeller, Unauthorized Charges on Telephone 

Bills, at 6 (July 12, 2011). 6 AOL Tech, ‘‘Forrester: U.S. Mobile Commerce To Reach $31 Billion By 2016,’’ http:// 

techcrunch.com/2011/06/17/forrester-u-s-mobile-commerce-to-reach-31-billion-by-2016/. 7See, e.g., Rimma Kats, ‘‘Office Depot expands mcommerce reach via business app,’’ http:// 

www.mobilecommercedaily.com/ (describing how retailer is now offering a mobile application designed to allow its contract customers to ‘‘browse, research, buy and approve office supply orders 

via their smartphones’’). 8 California’s Public Utilities Commission recently required wireless carriers and billing 

aggregators to report the cramming complaints received by their customers. See FCC NPRM at 

11. 

cramming.1 In 2010, approximately 10 percent of the cramming complaints received 

by the Federal Trade Commission (‘‘FTC’’) occurred in the wireless environment.2

The comparable figures for wireless cramming complaints received by the California 

Public Utilities Commission in 2009–2010,3 the Florida Attorney General’s Office in 

2006—March 2011,4 and the Vermont Attorney General’s Office in 2005–2011, were 

5 percent, 24 percent, and 16 percent, respectively. In addition, as noted in the Commerce Committee’s recent staff report on cramming, earlier this year the State of 

Texas and Verizon Wireless filed separate lawsuits against defendants accused of 

large-scale cramming to consumers’ wireless bills.5

The long-term impact of wireless cramming should also be considered in light of 

the current growth of mobile commerce, which sector is expected to reach $31 billion 

by 2016.6 As more Americans opt to use their mobile phones to pay for phone-related goods and services such as games, apps, ringtones and wallpapers, as well as 

for unrelated consumer goods,7 the potential for fraud may well increase. 

Question 2. What would this legislation look like compared to wireline legislation? 

Answer. Given the likelihood that many wireless subscribers are aware of—and 

may desire—the availability of their mobile phone account to pay for unrelated 

goods and services, it does not seem appropriate to prohibit third-party charges, as 

has been done by statute in Vermont for landline bills. However, there are a number of steps short of a ban that could be taken to ensure that consumers are not 

crammed on their wireless bills. These include: 

• Most effectively, blocking such charges unless and until the consumer opts out 

of the block. The need to opt out before being charged will ensure that consumers are informed of the potential for being charged, and that only those consumers who agree to the use of their wireless bill for that purpose will be subject to such charges. 

• Introducing an ‘‘adjust first’’ requirement, whereby wireless companies must 

issue credits immediately to all customers with cramming complaints, but can 

then seek reimbursement from the aggregator or third-party merchant. 

• Requiring a ‘‘double opt-in,’’ perhaps with a PIN, whereby consumers must give 

consent once, and then separately confirm their consent, before being billed by 

a third party. 

• Requiring that wireless companies periodically report on the cramming complaints they have received to a designated governmental agency, so that the extent of cramming can be gauged and cases of cramming investigated as appropriate.8

• Imposing strict liability on billing aggregators, and some form of liability on carriers, that extend beyond simply restoring consumer losses due to wireless 

cramming. Vermont law now renders billing aggregators potentially liable for 

consumer restitution and civil penalties when their merchant-clients violate the 

ban on third-party charges on local (landline) telephone bills. Extending such 

liability to the wireless environment, and in some form to wireless carriers, 

should incentivize those companies to screen the merchants whose charges they 

propose to facilitate. 

Other measures, such as prominent billing disclosures and mandatory due diligence by wireless companies in screening merchants before third-party charges are 

128 

applied, might also be considered, but I believe they are much less likely to prevent 

cramming than the recommendations described above. 

Question 3. In the last decade, state attorney generals and federal authorities 

have charged cramming companies with bilking consumers out of tens of millions 

of dollars. Do you believe that we are getting the bad actors or is the problem so 

large that enforcement actions will only address a small percentage of the illegal 

activity going on? 

Answer. I believe that law enforcement agencies are seeing, and reaching, only 

the tip of the iceberg, in several senses. First, the number of third-party merchants 

whose charges appear on consumers’ local telephone bills is very large, and there 

is no way that any single state attorney general’s office, group of AGs’ offices, or 

federal agency can take legal action against most of them. Second, the resources 

available to state law enforcement agencies are limited; even if one state, or several 

states, take action against a cramming merchant, that company may avoid sanctions, and continue to do its customary business, in the rest of the country. Third, 

it is in any event difficult for law enforcement agencies to make consumer victims 

entirely whole, returning to them all the money they have lost; although Vermont 

has made full restitution a priority in its settlements with third-party merchants, 

there is a substantial risk that insisting on such an outcome in other cases will 

cause the merchants to refuse to settle, leaving the government with no option but 

resource-intensive litigation (and a diminished capacity to pursue other wrongdoers). 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. MARK PRYOR TO

ELLIOT BURG

Question 1. Do you believe Federal legislation regarding cramming is needed? 

What provisions would you advocate that potential legislation include and why? 

Answer. Yes, and I think specifically that federal legislation, initially in the area 

of landline billing, holds the potential for extending to the Nation the kind of protection of consumers from cramming that Vermont has introduced at the state level. 

By way of explanation, as noted in my oral and written testimony before the Commerce Committee, the level of consumer awareness about third-party charges on 

local telephone bills is very low; and the incidence of cramming is very high. Specifically, the ongoing investigation of cramming by the Vermont Attorney General’s Office found—among other things—that only an estimated 27.4 percent of consumer 

survey respondents whose local telephone bills contained a third-party charge noticed the charge even within the first 3 months of its appearance on their telephone 

bill; and fully 89.5 percent stated that they had not agreed to be charged for the 

third-party services that appeared on their bill. In fact, a number of these consumers stated that they had no reason to order the services for which they were 

charged, giving such explanations as, ‘‘[I] have an answering machine [and so] 

would never use this service,’’ ‘‘I had voice-mail from the phone company [and] did 

not need [another service],’’ and ‘‘[I] can’t imagine agreeing to voice-mail since we 

have always had a personal voice recorder.’’ 

In light of numbers such as these, it is unreasonable to expect consumers to scrutinize their phone bills for unexpected charges. Indeed, a ten-year statutory requirement in Vermont that third-party merchants mail to consumers and businesses a 

free-standing notice of upcoming charges on their local phone bill . . . now supplanted by the state’s outright ban on such charges . . . was ineffective in creating 

a high level of awareness of such billings or a low level of cramming. Whether consumers did not read or understand the notices, or merchants did not actually send 

them, or the possibility of an unrelated charge assessed on a local phone bill was 

just beyond most people’s reasonable expectation . . . this serious attempt to use 

disclosure to cure cramming did not work. 

By contrast, the simplest, and most effective, way to address cramming in the 

landline context is to prohibit third-party charges, with reasonable but narrow exceptions, such as direct dial or dial-around services initiated from the subscriber’s 

telephone, and operator-assisted and collect calls. This approach, adopted in May 

2011 by statute in Vermont, takes into account the overwhelming lack of consumer 

awareness of the potential for third-party charges on local phone bills but also 

leaves merchants free to bill consumers through the more familiar channels of credit 

cards, debit cards, checks, electronic funds transfers, and PayPal. 

Question 2. You are an advocate for a ban on third party billing on telephone bills. 

Can you explain how you arrived at this course of action? 

129 

Answer. To clarify, the State of Vermont has instituted a ban on most third-party 

charges to landline bills. The rationale underlying that measure is set out in my 

response to no. 1. 

Question 3. Do you believe there are legitimate uses of third party billing that 

should be exempted from a comprehensive ban? If so, what are they? 

Answer. Vermont law contains the following exemptions from its prohibition on 

third-party charges on landline bills, which represent types of charges that lawmakers believed consumers could reasonably expect to appear on their local telephone bill: 

• Billing for goods or services marketed or sold by a company subject to the jurisdiction of the Vermont Public Service Board (the state utilities regulator); 

• Billing for direct dial or dial-around services initiated from the consumer’s telephone; and 

• Operator-assisted telephone calls, collect calls, and telephone services that facilitate communication to or from correctional center inmates. 

Question 4. How best can we separate the good actors in this market who play 

by the rules from the bad actors that do not? 

Answer. In the third-party merchant world, the good actors are either companies 

that sell services that consumers reasonably expect may be charged on their local 

telephone bills, or companies that choose some other billing method that consumers 

reasonably expect may be used, such as a credit or debt card. Merchants that use 

a billing method that runs counter to normal expectations are, I would submit, not 

good actors. 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. KELLY AYOTTE TO

ELLIOT BURG

Question. Vermont clearly has a very aggressive law on cramming. What are some 

of the difficulties you Ace in your enforcement actions against the practice of cramming? 

Answer. As noted in my response to Senator Klobuchar, law enforcement agencies 

face several significant hurdles in their efforts to address landline cramming. These 

include the very large number of third-party merchants whose charges appear on 

consumers’ local telephone bills, relative to the limited resources available to work 

the issue; the fact that only some states are in a position to take enforcement action, 

leaving other jurisdictions open to cramming; and the difficulties that exist in trying 

to make consumer victims entirely whole. Without a national ban on third-party 

charges to local landline bills, I believe that large numbers of American consumers 

will continue to be crammed, losses will continue to mount, and crammers will continue to profit. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. AMY KLOBUCHAR TO

DAVID SPOFFORD

Question 1. You testified in last week’s cramming hearing that your company is 

seeing an increase in wireless cramming charges. How drastically have these types 

of charges increased in the past few years? Please offer statistics. 

Answer. We have only begun to compile these numbers recently. I believe less 

than 5 percent of wireless invoices have cramming charges. 

Question 2. Do you believe stronger rules are or will be necessary to combat wireless cramming? 

Answer. It is too early to tell at this time. 

Question 3. How would these rules differ from wireline rules? What might that 

legislation look like? 

Answer. The banning of these charges in the wireless arena might have more unintended consequences for consumers and actually hinder convenience since there 

are more legitimate 3rd party charges for smart phones than for landline phones. 

Question 4. Your business exists to help other businesses sort though and minimize telecom charges and expenses, and one of your services is disputing third party 

charges placed on phone bills. How big a problem are cramming charges for your 

medium and small business clients? 

Answer. For landline customers, the problems are similar in medium size businesses. We don’t serve small business clients for landline services. 

130 

Question 5. Do these companies have the resources to go through their bills with 

a fine-tooth comb? 

Answer. No 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. MARK PRYOR TO

DAVID SPOFFORD

Question. In your written testimony, you cited some eye opening statistics about 

the prevalence of cramming. What steps would you recommend for this committee 

to consider taking to address the problem? 

Answer. Respectfully, I really don’t know. Taking away any carrier liability protection so that the carrier billing for the third party charges is not protected by tariffs or other liability limits might be a ‘‘free market’’ solution. The carriers often 

write and use tariffs to protect themselves from erroneous billing claims and other 

liability. Taking away this protection might force them to abandon the practice due 

to increased legal and financial exposure or to do a better job auditing and vetting 

the third party billers. The regulatory solution would be an outright ban. Unfortunately, this will create a precedent when you are confronted with similar challenges 

in wireless billing where third party charges are often legitimate—thus ‘‘hurting’’ 

consumers by making services less convenient to pay for. The free market solution 

might be easier to universally apply. That being said, I have no training in law or 

legislation. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. KELLY AYOTTE TO

DAVID SPOFFORD

Question 1. Mr. Spofford, if a company is made liable for fraudulent charges once 

notified by the consumer, should they also be responsible retrospectively? 

Answer. Yes. Unless the company (carrier or third party biller) can demonstrate 

with certainty that the consumer ordered the service being billed for, the company 

should be held liable for all prior charges. 

Question 2. Should companies only incur liability if they fail to audit or vet 3rd 

party billers? 

Answer. No. My understanding is that the carriers already claim to audit or vet 

3rd party billers. This apparently hasn’t worked. Unless carriers shoulder liability 

it seems unlikely they will perform adequate audits that only result in a decrease 

of profit to them. 

Question 3. Mr. Spofford, what is the typical experience you have with telephone 

companies and vendors when you have attempted to removed third-party charges 

from your clients’ phone bills? 

Answer. Typically, removal of third party charges requires 2 to 3 phone calls or 

transfers and possibly some follow-up calls if the removals/credits do not appear to 

be implemented in a timely fashion. 

Question 4. Can you give me some examples of how much money your clients were 

being cheated out of annually? 

Answer. The largest amount of improper third party billing for one Xigo Client 

was a total $140,514. 

Question 5. Were the unauthorized third-party charges always refunded? 

Answer. Unauthorized charges disputed by Xigo are normally stopped by the third 

party companies—however in some cases these charges continue for 2–3 months. 

Our statistics show that 93 percent of disputes were accepted and closed. However, 

generally, third parties are only willing to refund 2–3 months of charges. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. AMY KLOBUCHAR TO

WALTER B. MCCORMICK, JR. 

Question 1. Since all guidelines required by U.S. Telecom must be approved by 

representatives from telecom companies, each rule is essentially a voluntary measure. Cramming has been on the rise since the 1999 ‘‘Truth-in-Billing’’ guidelines 

were implemented. How would you suggest changing phone bill regulations to further clarify charge descriptions for consumers? How would you suggest mandating 

that telecommunications providers offer bills that clearly indicate third party 

charges, even if they stand to lose profits from the clarification? 

Answer. To be clear, the ‘‘Truth-in-Billing’’ Order adopted by the FCC in 1999 establishes mandatory obligations on carriers with respect to providing clear billing 

131 

information to customers. These rules require telephone companies to have bills 

that: 

(i) are clearly organized, clearly identify the service provider, and highlight any 

new service providers; 

(ii) contain full and non-misleading descriptions of charges that appear therein; 

and 

(iii) contain clear and conspicuous disclosure of any information the consumer 

may need to make inquiries about, or contest charges, on the bill. 

To further clarify, the Anti-Cramming Best Practices Guidelines are not ‘‘required 

by U.S. Telecom,’’ which does not conduct programs involving standard-setting, certification, or auditing for the industry. Rather, these Best Practices Guidelines were developed and adopted by individual companies in response to a challenge issued 

by then-FCC Chairman Bill Kennard to reduce or eliminate the cramming problem. 

These voluntary industry best practices go beyond the FCC’s ‘‘Truth in Billing’’ requirements with the aim of further preventing bad actors from obtaining access to 

the consumer’s bill, identifying cases of fraud quickly, and simplifying and expediting consumers’ ability to obtain refunds in those instances where they have paid 

unauthorized charges. 

We do not believe that bill format is the primary cause of unauthorized charges. 

As Illinois Attorney General Lisa Madigan’s testimony acknowledged at the hearing, 

the industry’s Best Practices Guidelines appeared to reduce the incidence of cramming until about three or 4 years ago. In response to an apparent rise in complaints 

in more recent years, many of our member companies have strengthened their practices to combat cramming. These companies have practices in place to clearly identify third party charges on subscriber bills, such as separate identification on the 

first page of the bill, separate billing page detailing all third-party charges, providing contact information, and noting new charges by an asterisk. Other controls, 

focused directly on aggregators and third-party providers, also appear to have been 

successful. AT&T, for example, achieved an 89 percent reduction in consumer cramming complaints in a 17-month period—from January 2010 to May 2011—following 

the imposition of audit requirements, financial penalties for each cramming complaint it receives, and more aggressive complaint thresholds. 

Bill clarity is important. It improves customer service by reducing the number of 

inquiries our companies receive. Bill quality, including clarity and absence of erroneous or unauthorized charges, is a major factor in overall customer satisfaction. As 

a result, telephone companies have a natural incentive to provide subscribers accurate and clear information on their bills. 

Having said all that, however, I reiterate the central point of my testimony: No 

consumer should be charged for a product or service that he or she has not actually 

and knowingly purchased, and the cramming problem has obviously persisted despite industry’s efforts to combat it. On July 12, 2011, the day before the Senate 

Commerce Committee hearing on this issue, the FCC initiated a rulemaking proceeding that proposes new regulations to protect consumers from the illegal placement of an unauthorized fee or charge onto monthly phone bills. The FCC notice 

of proposed rulemaking proposes a number of intriguing and potentially promising 

new approaches to ending or at least minimizing the occurrence of cramming. Once 

the FCC publishes the text of its proposed rules in the Federal Register and announces a formal comment period, we expect that industry members and other interested parties will carefully and thoughtfully review those proposals and provide 

constructive input for the FCC’s rulemaking process. 

Question 2. In your testimony you address levels of protection phone companies 

commonly use when dealing with new service providers. Even with contractual provisions, bad actors are continuing to find a way through protections. Are there penalties for phone companies or aggregators who cut corners when screening new actors? Though you refer to providing instant credit to a defrauded customer as ‘‘common practice,’’ do most companies actually require this credit? 

Answer. Although I cannot speak to the practices of each of the hundreds of local 

exchange companies (LECs) operating in the United States, the industry’s leading 

companies do indeed impose penalties on aggregators who fail to properly screen 

new product or service vendors, as well as on the vendors themselves. As my testimony indicated, these LECs set complaint thresholds applicable to these parties and 

provide for suspension or termination of billing services if those thresholds are exceeded. Contracts with aggregators often include penalties to be paid by the 

aggregator for each complaint received. Companies are also looking to other measures to screen new and existing aggregators and providers. For example, AT&T requires aggregators to ‘‘actively oversee’’ the operations of service providers. The 

132 

aggregators are then subject to annual audits. Based on the first set of audit reports, AT&T has identified both ‘‘best practices’’ and weaknesses in the operations 

of the aggregators. When weaknesses are identified, AT&T requires that they be 

corrected. Over time, AT&T expects the audit process to drive significant improvements in aggregator operations. 

It is also the policy of these companies to offer an instant credit to a customer 

who complains that a charge on his or her bill is not recognized or was not authorized. Although we recognize that among the many thousands of interactions our 

companies have with their customers on a daily basis the Committee may have uncovered instances in which that credit was not offered immediately, we believe that 

in the vast majority of cases, such charges are credited back to the customer 

promptly with no questions asked. 

Question 3. Your predecessor stated to Congress in 1998 that consumers must 

take more responsibility in examining their bills. Deceptive techniques are intentionally used to confuse customers into missing cramming charges. Do you believe 

it is reasonable to put the burden on the customer to catch vaguely identified 

charges on their personal phone bills? 

Answer. I cannot speak to the intent behind the statement of my predecessor described in your question, but based on my current understanding of this issue, I do 

not believe he meant to place the entire burden on the customer for identifying or 

catching vague or otherwise disguised charges on their phone bills. Rather, he 

seemed to be making the common-sense suggestion that consumers review their 

phone bills as carefully as they would any bill they receive—whether their monthly 

water or electric bill, or their grocery bill, or an insurance premium bill—to ensure 

they understand what they’re being charged for and to challenge any item that appears questionable or suspicious. Indeed, both the FCC and FTC have issued consumer bulletins encouraging consumers to take the same steps. In the FTC’s ‘‘Facts 

for Consumers’’ and the FCC’s ‘‘Consumer Facts’’ both agencies urge consumers to 

review their telephone bills for unauthorized charges. This is just good commonsense advice, and no one should consider it as intended to take the place of company 

steps to provide clear bills and aggressively working to prevent cramming in the 

first place. 

Existing truth-in-billing rules already require that ‘‘the description must be sufficiently clear in presentation and specific enough in content so that customers can 

accurately assess that the services for which they are billed correspond to those that 

they have requested and received and that the costs assessed for those services conform to their understanding of the price charged.’’ Our members review third parties’ service descriptions before they approve the ‘‘text phrases’’ that appear on their 

bills, and they attempt to ensure that those text phrases are brief, clear, and nonmisleading. It may be that companies need to provide consumers with additional information about third party billing availability and third party bill blocking. The 

Commerce Committee’s current investigation, as well as the FCC’s Notice of Proposed Rulemaking, has also raised awareness of the issue. 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. MARK PRYOR TO

WALTER B. MCCORMICK, JR. 

Question. Some of your members have been involved with settlements with Attorneys General over third party billing. To what extent have those agreed to conditions been incorporated into ‘‘best practices’’ for your industry? 

Answer. Although I have not done an exhaustive study of the subject, I am aware 

of only one settlement by a member company of our Association with a State Attorney General. In that case, AT&T was required, in an agreement with the Florida 

Attorney General, to reduce the incidence of cramming complaints by its customers 

throughout its Southeast region. AT&T implemented a new and aggressive enforcement program in early 2010 and achieved an 89 percent reduction in consumer 

cramming complaints in the succeeding 17 months through May 2011, exceeding the 

requirements of its Florida settlement. 

Likewise, while crammers, scammers, and con artists have continued to find new 

and more sophisticated ways of evading detection, our leading member companies 

have continued to improve and tighten their own third-party billing practices to 

guard against consumer complaints. The ways in which those practices have evolved 

in recent years are spelled out more specifically in my written testimony. The testimony of Illinois Attorney General Madigan and Vermont Assistant Attorney General 

Burg indicated that the cases they have brought in this area, and the settlements 

or judgments they have obtained, involve billing aggregators and third-party vendors rather than local exchange companies. 

133 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. KELLY AYOTTE TO

WALTER B. MCCORMICK, JR. 

Question. Mr. McCormick, as you know, in 1998 the FCC held a workshop on 

cramming and from that workshop, it developed the ‘‘Anti-Cramming Best Practices 

Guidelines’’. One of the recommendations in the guidelines is for the Local Exchange 

Carriers to provide law enforcement with data to help control and combat cramming. Can you expand a little on how your industry has been working with law enforcement and what improvement and changes you would recommend we make to 

better address cramming? 

Answer. I am assured by our large and midsize companies that they cooperate 

with law enforcement during investigations of cramming fraud and similar violations of law. For example, in response to subpoenas and legal requests, our member 

companies have in many cases provided billing data and information to assist in investigations by both state and federal agencies. Additionally, several of our members have also been engaged in regular dialogue with law enforcement on cramming 

issues in general, and they will continue to cooperate with law enforcement as an 

industry and on a case-by-case basis. Details regarding specific instances of cooperation with law enforcement are highly sensitive, as they could reveal tactics related 

to ongoing investigations. Accordingly, if you would like a private briefing from any 

of these companies to learn more about how they deal with law enforcement requests, we would be happy to help facilitate that. 

Submitted Statements and Letters 

TELETRUTH

July 14, 2011 

Cramming and Mysterious Phone Fees 

We are glad to see that this Committee is again addressing ‘‘cramming,’’ usually 

defined as ‘‘placing unauthorized third-party charges on consumers’ telephone bills.’’ 

However, ‘‘Ramming’’ is the major creator of ‘‘mysterious phone fees’’ and overcharging in America, impacting over 80 percent of all small business and residential 

customers, and costing $8–$10 billion in excess wireline-based local and long distance phone charges annually. 


713TELE1.eps
134 

‘‘Ramming’’—The phone company you already have a relationship with is harming 

you, by not telling you the ‘‘best option’’ and putting you on the most expensive plan 

or on a service you can’t even use, need or didn’t even order. 

Unfortunately, neither ramming nor cramming is new. 

Bill Kennard, former Chairman of the FCC, stated, February 4, 1999 http://transition.fcc.gov/Speeches/Kennard/spwek904.html. 

‘‘After receiving thousands of complaints about companies cramming all these 

strange and hard-to-understand charges on bills, we have taken action. We have 

proposed new guidelines for phone companies on how they can make phone bills 

simpler and easier to understand. We want to make it so that the statement 

sent to you each month is as clear and easy to understand as the nutrition label 

on a box of Wheaties.’’ 

According to the FCC, in 2011, 1 in 20 are impacted by cramming and it is usually a one-time fee, accounting for hundreds of millions of dollars annually. 

‘‘Ramming,’’ however is the larger problem because it can cost a small business $500.00–$1,000.00 annually, $100.00–$500.00 for residential customers—and it can 

go on for years. 

‘‘Ramming’’ Example 

In the front of our testimony we present a typical Verizon, New York small business grocer’s bill with only 2 lines who has been ‘‘rammed,’’ put on 4 different packages that they do not use and claim in interviews they did not order. The bill shows 

two ‘‘Centrex Plus Assumed Dial 9 (Custopak)’’ services (which is a package of calling features that is supposed to replace a phone system and has features like ‘‘call 

transfer’’ and ‘‘intercom’’ ). Unfortunately, one line is a data-line, used for an ATM 

machine that can’t use the features and can’t ‘‘intercom’’ with the other line. This 

grocer was put on an unlimited plan for local, toll and long distance calling, where 

they make virtually no local, toll or long distance calls. This customer was overcharged over $1,000.00 a year. 

From school boards and police stations, restaurants and grocery stores, to nonprofits or home offices, ramming of services is a fact of life. In our new research 

we documented various toll and long distance calling packages on phone lines that 

can’t make calls, phantom-missing lines being charged, calling feature packages 

where the features can’t be used, or paying for Internet-related services that the 

customer didn’t order. 

There Is No Truth in ‘‘Truth-In-Billing’’ 

It is no wonder that 80 percent of customers, both residential and small businesses, are being overcharged through ramming, cramming and slamming. 

We will be filing a new complaint to the FCC and FTC outlining over the 138 

potential truth-in-billing and truth-in-advertising violations on just 1 Verizon New 

York small business bill, the affiliated advertising and web information surrounding 

the customers’ charges, making it impossible to understand basic costs and services. 

Using this one Customer’s bills and information supplied we found: (NOTE: The 

‘‘detailed’’ phone bill in the front is only sent 3 times a year. Not one customer we 

interviewed knew there was a more detailed bill.) 

• The ‘‘Monthly’’ bill is useless and is hiding under ‘‘monthly service’’ four 

rammed packages the customer did not need, want, order or can even use. 

• Verizon does not give basic information, such as how many lines there are or 

what is on each line on either the monthly or ‘‘tri-annual’’ bills. 

• There is no Rosetta Stone to understand how the myriad of taxes are applied. 

• Under ‘‘monthly service,’’ taxes and surcharges are hidden, being double taxed 

or even triple taxed as in some cases they are made up or pass-through taxes 

the company should be paying. 

• The long distance charges are ‘‘made up’’ as they do not reflect ALL of the long 

distance fees, taxes, and surcharges added, just two questionable ‘‘PICC’’ fees 

which were supposed to be removed a decade ago, that is taxed. 

• Website: Verizon does not supply even basic, accurate information on what a 

‘‘basic’’ POTS, (plain old telephone service), business line costs. 

• Website: Verizon’s packages never explain the actual costs of a service on either 

their website or even in customer presentations, leaving out 20–50 percent of 

the actual costs, or the costs after the promotion price leaves. 

• Verizon, New York still uses the term ‘‘FCC Line Charge,’’ which was considered a violation of TIB because it sounds like the charges goes to fund the FCC, 

but it is direct revenue back to the Verizon. 

135 

These are just a few of hundreds of issues that make phone bills unreadable to 

the average customer, who just reads the front page total and pays their bills. 

‘‘Harvesting’’ of Customers and the FCC Cover Up through Atrocious Data 

Related to ramming is ‘‘Harvesting,’’ where AT&T and now even the local phone 

companies are essentially raising rates continuously until the customer screams 

uncle and is pushed onto a more expensive package of services or is gouged. 

This practice has been focused on gouging low income, low volume users, including Lifeline customers and Seniors. 

The FCC has been claiming that they are ‘‘data driven’’ yet, how can the Agency 

be data driven when they don’t use actual phone bills are the source materials for 

phone bill charges information, our they fail to collect industry-wide data via actual 

bill surveys? 

In short, the FCC’s data on phone bill charges is atrocious and has covered over 

massive customer overcharging, We can say this without flinching as we’ve been 

critical about FCC phone charges data since our first complaint in 1994 and have 

been filing, in not only about truth-in-billing proceedings, but on cost of service 

issues, mistakes on bills, and the problems of using industry statistics. (In fact, 

Teletruth has its own web pages at the FCC in the ‘‘Data Quality Act’’ section of 

the site.) 

Let me be specific. AT&T’s has been ‘‘harvesting’’ customers, which started as a 

result of the FCC’s decision to close down competition on the phone networks, including stopping then AT&T and MCI’s ability to compete for local service. 

Today, AT&T’s basic 1 minute long distance rate if you don’t have a plan (or it 

expired) is now $.39 a minute, $.97 a minute for business. How many customers are 

paying that? How many customers have ‘‘minimum usage’’ fees, plan fees, made up 

taxes and make few, if any calls? 

Note: International calls without plans are truly gouged: France cost $3.25 a 

minute, United Kingdom is $2.82, Canada is $1.13, Japan is $3.76, and the Ukraine 

is $5.99 a minute. 

In 2004 and 2008 Teletruth, working with UCAN, a consumer group in San Diego, 

California collected hundreds of actual wireline, wireless, cable, broadband and 

Internet bills, then did follow interviews. Funded by a grant from the California 

Consumer Protection Fund, large segments of the population, including Lifeline customers, seniors and customers who ‘just pay their bills,’ were being forced to pay 

continuously higher fees—customers paying $.50–$1.00 a minute for wireline long 

distance service was common. (Note: AT&T grandfathered a host of different plans 

with different pricing, minimum usage, etc.) 

The FCC claims that a 1 minute long distance or wireless call is $.05, and this 

is based on industry statistics with no reality to what customers are actually paying. 

• Read Our California Phone Bill Survey Report 

• http://www.teletruth.org/docs/UCANteletruth.pdf 

• Read the Phone Bill Related Data Quality Complaints 

• http://www.teletruth.org/docs/DQAphonecharges.doc 

• To Read Our Report on AT&T Harvesting 

• http://www.teletruth.org/docs/Dataqualityactharvesting.doc 

How to Fix the Problem? 

Chairman Bill Kennard in 1999 stated that he couldn’t read the phone bill. 

‘‘A few months ago, my wife was going over our bills, and she called me over. 

‘Honey, can you give me hand with this phone bill. I just don’t understand all 

these charges.’ I walked over, ready to make good use of hours of reading, 

countless briefings, and years of practicing communications law. And you know 

what? I didn’t understand them either. . . . Now, if the Chairman of the FCC 

can’t understand his phone bill, then there’s a problem.’’ 

He added that phone bills would get ‘‘more confusing.’’ 

‘‘In the next few years, these bills have the potential to get even more confusing 

as more and more of us will be buying more advanced services from a huge 

array of companies. That is why it is imperative that bills are clear and easy 

to read. It is imperative that nothing is crammed onto them that you don’t want 

or don’t understand. You should be able to read your bill and know what you’re 

paying for.’’ 

136 

What Should Be Done? 

Have us testify about ramming and read our books: Teletruth has just released 

our two volume set, ‘‘Survival Guide & Workbook for Residential & Small Business 

Wireline & Wireless Telecommunications’’ to help the phone customers examine 

their bills for potential mistakes and overcharging on their Verizon, AT&T and 

other phone bills that could lead to refunds or future savings. 

• ‘‘Secrets of Your Phone Bills: Have You Been Rammed, Slammed Or Crammed 

By Your Phone Company and are Owed Money?’’ 

• ‘‘Teletruth’s Step-by-Step, Auditing Your Phone Bills for Refunds & Savings 

Workbook’’ 

We wrote them because right now $8–$10 billion dollars of overcharging has been 

and will be placed on customers’ phone bills during 2011 and neither the FCC nor 

Congress has a clue about how to fix these problems, or has investigated our claims 

over the last two decades. 

If Congress is serious about this, there are a host of steps it could take immediately to fix the problems of unreadable phone bills and customer overcharging. 

When we testify we will be glad to outline them or you can read about them in our 

new publications. 

About Teletruth 

Teletruth is a nationwide, customer advocacy group created to defend the rights 

of all customers, residential and businesses alike. Tom Allibone, Teletruth’s Director 

of Auditing is a 40 year telecom veteran having started at AT&T and has been offering forensic phone bill auditing services for decades, recovering millions for customers. Bruce Kushnick, Executive Director of New Networks Institute, has been 

a visionary telecom analyst for 30 years, working with the industry leaders to deploy new services, such as the first 3 digit information service (like 311), in 1992, 

to examining and tracking the impacts the progeny of Ma Bell has had on 

broadband deployment, economic growth and customers’ pocketbooks. 

Working as a team, Teletruth has helped to create multiple class action suit settlements, acted as ‘‘expert witnesses’’ and was on the FCC Consumer Advisory Committee. Teletruth is not funded by and is not affiliated with any political party or 

corporation. 

Bruce Kushnick, 

Chairman, Teletruth. 

Executive Director, New Networks Institute. 

bruce@teletruth.org 

http://www.teletruth.org 

CONSUMERS UNION

July 13, 2011 

Hon. JOHN D. ROCKEFELLER IV, 

Chairman, 

Committee on Commerce, Science, and 

Transportation 

U.S. Senate 

Washington, DC. 

Hon. KAY BAILEY HUTCHISON, 

Ranking Member, 

Committee on Commerce, Science, and 

Transportation, 

U.S. Senate 

Washington, DC. 

Re: Unauthorized Charges on Telephone Bills: Why Crammers Win and Consumers 

Lose 

Dear Chairman Rockefeller and Ranking Member Hutchinson: 

Consumers Union, the nonprofit publisher of Consumer Reports  magazine, 

writes to express support of the Committee on Commerce, Science, and Transportation’s upcoming hearing on unauthorized telephone billing or ‘‘cramming.’’ 

Cramming presents a significant threat to consumers. Consumer Reports  reported on the experience of John Arwe, a computer programmer who found a $15 

charge on his Verizon bill for voice mail and, again, a pair of $8 charges for voice 

mail. He never authorized either and spent over twenty hours getting the charges 

from the third party billers and aggregators removed. 

The Federal Communications Commission has indicated also that roughly 20 million Americans are victimized annually by unscrupulous companies which illegally 

insert consumer bills with these unauthorized, cryptic charges. So duplicitous are 

the methods used by the third party billers and aggregators who engage in cramming that only around 5 percent of those consumers are even aware they are being 

defrauded. 

137 

1The National Consumers League, founded in 1899, is America’s pioneer consumer organization. Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad. For more information, visit www.nclnet.org. 2 ‘‘Cramming: The practice of placing charges on your telephone bill for unauthorized products 

or services,’’ Federal Communications Commission fact sheet. Online: http://transition.fcc.gov/ 

DailylReleases/DailylBusiness/2011/db0620/DOC–307726A1.pdf. 3 Comments of Beth Blackston, FTC workshop on cramming, May 11, 2011. Pg. 27. Online: 

http://www.ftc.gov/bcp/workshops/cramming/10511phoneworkshop.pdf. 4FTC v. INC21.com Corp., (N.D. CA 2010). 

It is evident that cramming is a wide-spread threat to consumers. Effective regulation of cramming is vital in order to protect consumers from unauthorized charges. 

We look forward to working with Congress to address the unfair and misleading 

practices employed by companies that profit from the practice of cramming. 

Respectfully Submitted, 

PARUL P. DESAI, 

Policy Counsel, 

Consumers Union. 

NATIONAL CONSUMERS LEAGUE

July 13, 2011 

Hon. JOHN D. ROCKEFELLER IV, 

Chairman, 

Committee on Commerce, Science, and Transportation, 

U.S. Senate, 

Washington, DC. 

Dear Chairman Rockefeller: 

The National Consumers League 1 (NCL) would like to take this opportunity to 

thank you for convening today’s hearing on stopping *cramming,* the placement of 

unauthorized charges on consumers* monthly phone bills. For too long, cramming 

has bedeviled American telecommunications consumers. You and the members of 

the Commerce Committee are to be applauded for your leadership in bringing attention to this important issue. 

For more than a decade, NCL has sought to raise consumer awareness about 

cramming. Despite vigorous consumer education efforts by governmental agencies 

and non-profit groups, cramming continues to be a lucrative crime. The FCC estimates that 15 to 20 million American households receive crammed charges on their 

wireline phone bills each year.2 Voluntary efforts by the telecommunications industry and billing aggregators to address the issue have been largely unsuccessful. We 

believe that now is the time to take concrete steps to rein in cramming scams by 

prohibiting, with few exceptions, third-party billing on wireline phone bills and by 

giving regulators better tools to crack down on crammers. 

Cramming is a Significant Crime with Real Victims 

Cramming is a significant problem for consumers for a number of reasons. First, 

identifying mistakes in a phone bill requires careful perusal of multi-page phone 

bills to identify suspicious charges. Even when reviewing a printed monthly phone 

bill, a small charge of $2.99 can get lost among regulatory fees, taxes and other legitimate line items. Descriptions of the services also act to confuse consumers, with 

some examples including, ‘‘voice online, dial forward, dial flex, plan plus, network 

one, call advantage, custom call, and value plan.’’ 3 Today, with telephone bills increasingly paid electronically via ‘‘paperless’’ initiatives, the chances of a consumer 

catching erroneous charges are smaller than ever. It is therefore unrealistic to expect consumers to go line by line through their phone bills on a regular basis. Crammers are well aware of this tendency and in fact depend on it. According to a Federal Trade Commission (FTC) survey, only one in twenty victims of cramming were 

aware that they were being defrauded.4

Even when a consumer does identify a suspicious charge, it is often difficult to 

resolve the situation. For example, Joe Ticich, a consumer in West Virginia, recently 

noticed an erroneous charge of $15.22 from a company called Main Street Telephone 

on his Verizon home telephone bill. The charge reappeared on his phone bill even 

after both Verizon and Main Street Telephone assured Ticich that the charge had 

138 

5Susanna Kim, ‘‘How to spot and prevent unauthorized phone bills,’’ ABC News, June 21, 

2011. http://abcnews.go.com/Business/95-percent-victims-detect-unauthorized-charges/story?id= 

13892850. 6FCC press release, ‘‘FCC chairman Genachowski unveils new actions to help consumers prevent & identify mystery fees* on phone bills, known as ‘cramming,’ ’’ June 20, 2011. Online: 

http://transition.fcc.gov/DailylReleases/DailylBusiness/2011/db0620/DOC–307732A1.pdf. 7FCC press release, ‘‘Cramming & Consumers: How the FCC is fighting unauthorized ‘‘mystery fees’’ on phone bills,’’ June 20, 2011. Online: http://transition.fcc.gov/DailylReleases/ 

DailylBusiness/2011/db0620/DOC307728A1.pdf. 8 ‘‘Court Permanently Shuts Down Massive Cramming Operation,’’ Federal Trade Commission 

press release. Sept. 30, 2010. Online: http://www.ftc.gov/opa/2010/03/inc21.shtm. 9 Comments of Beth Blackston, FTC workshop on cramming, May 11, 2011. Pg. 27. Online: 

http://www.ftc.gov/bcp/workshops/cramming/10511phoneworkshop.pdf. 

been rectified.5 Main Street Telephone was later ordered to return more than $4.2 

million in fraudulent payments.6 Mr. Ticich is not alone. A recent Federal Communications Commission investigation noted a woman from Missouri who filed a complaint after she learned she had paid unauthorized charges unnoticed for 25 

months.7

Second, the crammers themselves have perfected methods for gaming the system 

to keep their fraud undetected. Last year, a Federal Trade Commission investigation uncovered a scheme 5 years running, where two San Francisco brothers, Roy 

and John Lin, made over $37 million through cramming charges. The brothers employed telemarketers to call consumers and ‘‘verify’’ their addresses, only to use recordings of the phone calls as ‘‘proof’’ of authorization for later charges. The FTC 

even found that only 5 percent of those billed in this case knew about the charges.8

Cramming is a problem that affects businesses as well as individual consumers. 

Beth Blackston, an Assistant Attorney General for the State of Illinois, recently described one example where 9,842 phone company customers had received charges 

on their phone bills for credit repair services, typically considered a service for individuals, not businesses. Victims included a Steak ’n Shake restaurant, a county 

coroner’s office, a Super 8 lodge, and the story line of the local public library.9

Despite industry efforts to reign in cramming, third-party billing remains an avenue to consumers* pocketbooks that is rife with fraud. Except in a very few circumstances, we believe that there is little reason why a consumer would want to 

be billed by a legitimate third-party service provider on their wireline telephone bill. 

Indeed, a FCC investigation found that only 20 out of 17,384 consumers actually 

used the third-party service for which they were billed. The same investigation 

found that just 22 of the 18,571 consumers charged for dial-around long distance 

actually used the service, a usage rate in both cases of roughly 0.1 percent. 

State Anti-Cramming Efforts Are a Template for Federal Protections 

Across the country, twenty-five states have implemented legislation related to 

cramming. These laws vary greatly in scope, from difficult-to-enforce general prohibitions to more comprehensive laws that effectively end fraudulent third-party billing. 

We urge the Committee to consider the unique approach taken by the state of 

Vermont where new anti-cramming legislation uniquely positions that state to end 

this scam for good. The Vermont law generally prohibits third-party billing, unless 

the third party (1) is subject to the jurisdiction of the Vermont Public Service Board 

including phone companies that market television and Internet services, (2) is a direct dial service or dial-around service initiated from an individual’s telephone, or 

(3) is an operator assisted call, collect call, or service for inmates making calls. 

For some time, opponents of anti-cramming legislation have pointed to legitimate 

third-party services that should be allowed. Some third-party service providers, billing aggregators and telecommunications carriers have taken steps to make fraud 

less likely. Still the FCC’s finding that virtually no consumers used the third-party 

services for which they were billed coupled with so many examples of abuse over 

the last decade, suggest that any solution other than that enacted in Vermont is 

insufficient to address the problem. 

In light of the potential for continued cramming abuses, we urge that FCC and 

FTC oversight over third-party billing be strengthened. In this area, we recommend 

that the Committee consider the new rules adopted by the California Public Utilities 

Commission (CPUC) last year. Under these new rules, the CPUC requires billing 

aggregators to submit quarterly reports that indicate (1) refunds they made to their 

customers in response to cramming complaints, and (2) third-party services they 

suspended or terminated from access to third-party billing. The new rules also require explicit permission from customers before allowing third-party charges and reVerDate Nov 24 2008 08:45 Dec 15, 2011 Jkt 071640 PO 00000 Frm 00142 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\71640.TXT SCOM1 PsN: JACKIE
139 

10 ‘‘CPUC Strengthens Consumer Protections Against Cramming and Fraud on Telephone 

Bills.’’ California Public Utilities Commission press release. October 28, 2010. Online: http:// 

docs.cpuc.ca.gov/PUBLISHED/NEWSlRELEASE/125716.htm. 

quire billing aggregators to provide consumers with a no-cost option to block or limit 

third-party offerings.10

While these rules do not immediately prevent cramming and continue to put the 

onus on consumers to study their monthly phone bills carefully, these reporting requirements are critical both for determining the efficacy of anti-cramming measures 

and for indicating to consumers those third-party billers they should avoid due to 

known violations. Strong oversight and reporting are thus critical components to 

any future anti-cramming legislation. 

Solutions To Cramming Are Within Reach 

Consumers should never be billed for services they do not want or did not request. 

For over a decade, consumer groups have called on telecommunications carriers to 

notify customers in advance of billing for services, to clearly describe services on 

phone bills, and to provide customer service that is focused on clearing erroneous 

charges. Despite these efforts, cramming remains a fraud that regularly affects millions of Americans. 

The evidence of a significant cramming problem is clear. We call on the committee 

to take a tough stand against crammers, to recognize that third-party billing is generally not consumer-friendly, and that the FCC, FTC and consumers need more 

tools to address the problem. With Vermont’s new law and the CPUC’s cramming 

regulations as a template, a workable solution that protects consumers is within 

reach. 

Thank you for your attention to this issue. We look forward to answering any 

questions you or your colleagues on the Senate Commerce Committee may have. 

Sincerely, 

SALLY GREENBERG, 

Executive Director. 

cc: The Honorable Kay Bailey Hutchison, Ranking Member 

NATIONAL ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS

July 12, 2011 

Hon. JOHN D. ROCKEFELLER IV, 

Chairman, 

Committee on Commerce, Science, and 

Transportation, 

Washington, DC. 

Hon. KAY BAILEY HUTCHISON, 

Ranking Member, 

Committee on Commerce, Science, and 

Transportation, 

Washington, DC. 

Re: Senate Commerce Committee Hearing on Unauthorized Charges on Telephone 

Bills: Why Crammers Win and Consumers Lose—July 13, 2011 

Dear Chairman Rockefeller and Ranking Member Hutchison: 

On behalf of the National Association of Regulatory Utility Commissioners 

(NARUC), we are writing to commend your investigation into and hearing on cramming issues. This issue continues to affect consumers despite unprecedented technological advancements in the telecommunications space marketplace and focused 

Federal and State enforcement activity. 

NARUC represents the government experts from each of your States, U.S. Territories, and the District of Columbia on, among other things, telecommunications 

utilities. These public utility commissions know and understand local markets and 

conditions. They excel at responsive consumer protection, handling new abuses, and 

enforcing federal standards where appropriate. NARUC members share your concern with fraudulent or deceptive billing practices that harm consumers. 

As early as 2002, NARUC adopted a resolution concerning Telecommunications 

Consumer Bill of Rights (text attached). The resolution, among other things, affirmed ‘‘consumers should have a right to receive clear and complete information 

about rates, terms and conditions for available products and services, and to be 

charged only according to the rates, terms and conditions agreed to’’ and called for 

consumers to have ‘‘fair, prompt and courteous redress for problems they encounter.’’ 

NARUC members receive and resolve thousands of cramming complaints every 

year returning hundreds of thousands of dollars to consumers as a result of their 

actions. Cramming is a prime example of States working hand in glove with their 

federal partners at the Federal Communications Commission (FCC) and Federal 

140 

Trade Commission (FTC). Indeed, a December 2009 GAO report (http:// 

www.gao.gov/new.items/d1034.pdf) on wireless oversight by the FCC touted the obvious benefits of coordinated federal and state action. Consumers only benefit from 

a continuation of that collaborative enforcement partnership. 

Despite these efforts, it is clear that cramming remains a problem. This demonstrates how ‘‘bad actor’’ problems cannot be handled by market forces alone and 

how changes in technology don’t necessarily change or resolve consumer concerns. 

We appreciate your leadership on this important issue. NARUC stands willing to 

work with Congress, the FCC, FTC and other stakeholders to address this and other 

consumer concerns. 

If you have questions about NARUC’s positions or would like to discuss it further, 

please contact NARUC Legislative Director Brian O’Hara at (202)898–2205, 

bohara@naruc.org or NARUC General Counsel Brad Ramsay at (202)898–2207, 

jramsay@naruc.org. 

Sincerely, 

Tony Clark, President, NARUC 

John Burke, Chair, Committee on Telecommunications 

cc: Members of the Commerce, Science, and Transportation Committee 

Resolution on Telecommunications Consumer Bill of Rights 

WHEREAS, The past decade has been witness to a rapid evolution in the telecommunications industry, not only in the technology the industry employs, but also 

in the industry’s structure, the mix of services provided, and the way services are 

provided to consumers; and 

WHEREAS, Many of what were once monopoly services are increasingly available 

from competing providers, and regulatory policies have likewise been evolving in 

ways aimed at enabling and promoting competition to foster the benefits competition has promised to provide; and 

WHEREAS, It was once envisioned that competition would result in lower levels 

of consumer abuse and fraud, but the contrary has proven true; and 

WHEREAS, Consumers are now exposed to unprecedented levels of consumer 

abuse and fraud in many segments of the market, including segments that previously experienced only occasional examples of such problems; and 

WHEREAS, With the emergence of competition and the deployment of new telecommunications technologies, general consumer protection rules that were developed under monopoly conditions may in some respects be no longer adequate to protect small consumers. Consumers require protection against abusive practices in the 

marketing and provisioning of both old and new types of telecommunication services; and 

WHEREAS, Such changes in the telecommunications industry suggest that it 

would be timely for regulatory bodies to review the general rules protecting consumers and determine whether new rules using a new format should be developed; 

and 

WHEREAS, A Consumer Bill of Rights can be a useful vehicle to educate consumers and guide the revision of existing consumer protection rules and/or establish 

new rules applicable to all regulated telecommunications carriers that provide service to residential and small business consumers; and 

WHEREAS, Fundamental rights of consumers should include rights to disclosure, 

choice, privacy, participation in public policy proceedings, enforcement, accurate 

bills, freedom from discrimination, and safety; now therefore be it 

RESOLVED, That the Board of Directors of the National Association of Regulatory Utility Commissioners (NARUC), convened at its July 2002 Summer Meetings in Portland, Oregon, urges that a Consumer Bill of Rights for consumers of 

telecommunications services be developed for the protection of all residential and 

small business telecommunications consumers, regardless of their provider of such 

services, and should include the following: 

1. Disclosure: Consumers should have a right to receive clear and complete information about rates, terms and conditions for available products and services, 

and to be charged only according to the rates, terms and conditions they have 

agreed to, and that reasonable notice is given prior to an increase in rates or 

more restrictive terms or conditions; and 

2. Choice: Consumers should have a right to select their services and vendors, 

and to have those choices respected by industry; and 

141 

3. Privacy: Consumers should have a right to personal privacy, to have protection from unauthorized use of their records and personal information, and to reject intrusive communications and technology; and 

4. Public Participation Enforcement: Consumers should have a right to participate in public policy proceedings, to be informed of their rights and what agencies enforce those rights, and to have effective recourse if their rights are violated; and 

5. Accurate Bills and Redress: Consumers should have a right to accurate and 

understandable bills for products and services they authorize, and to fair, 

prompt and courteous redress for problems they encounter; and 

6. Non-Discrimination: Every consumer should have the right to be treated 

equally to all other similarly situated consumers, free of prejudice or disadvantage; and 

7. Safety: Consumers should have a right to safety and security of their persons 

and property; and be it further 

RESOLVED, That NARUC urges both the Federal Communications Commission 

and individual state commissions to consider adoption of comprehensive and effective rules to implement these rights which do not preempt the ability of the states 

to promulgate more stringent rules than the FCC, while taking into account the specific parameters of each state commission’s telecommunications jurisdiction. 

Sponsored by the Committee on Consumer Affairs 

Adopted by the NARUC Board of Directors July 31, 2002 

Æ