UNITED STATES OF AMERICA 

Federal Trade Commission 

WASHINGTON, D.C. 20580 

Office of the Secretary 

September 13, 2017 

Via FCC Electronic Comment Filing System 

Marlene H. Dortch, Secretary 

Federal Communications Commission 

Office of the Secretary 

236 Massachusetts Ave., NE 

Washington, DC 20002 

Re:	 Notice of Proposed Rulemaking in CG Docket No. 17-169, Protecting 

Consumers from Unauthorized Carrier Changes and Related Unauthorized 

Charges 

Dear Ms. Dortch: 

On August 14, 2017, the Federal Communications Commission (“FCC”) published in the 

Federal Register a Notice of Proposed Rulemaking (“NPRM”) in the above-captioned docket, 

which includes a proposal to codify the FCC’s existing prohibition against cramming that the 

FCC has enforced under Section 201(b) of the Communications Act. NPRM ¶ 13. The Federal 

Trade Commission (“FTC”) has done extensive work to combat cramming, and we support the 

FCC’s efforts to identify effective means of preventing cramming. 

As the FCC considers this specific proposal, the attached FTC staff’s report on Mobile 

Cramming, released July 2014, may be of assistance. In particular, Section III.B discusses the 

consumer harm associated with mobile cramming, and Section III.A.1 discusses the FTC’s law 

enforcement efforts to combat cramming. Since the report was issued, the FTC has continued to 

take action to protect consumers from cramming. For example, the FTC recently returned over 

$88 million to AT&T customers as part of a settlement to address the FTC’s allegations that the 

company had crammed unauthorized charges on consumers’ mobile phone bills.1 The FCC, all 

50 states, and the District of Columbia joined the settlement. These refunds represent the most 

money ever returned to consumers in a mobile cramming case. 

1 See Press Release, Fed. Trade Comm’n, FTC Providing Over $88 Million in Refunds to AT&T Customers Who Were 

Subjected to Mobile Cramming (Dec. 8, 2016), available at https://www.ftc.gov/news-events/press-releases/2016/12/ftcproviding-over-88-million-refunds-att-customers-who-were. 
We hope the report will be of assistance as the FCC identifies effective means of 

protecting consumers from cramming. 

By direction of the Commission. ~J.~ 

Donald S. Clark 

Secretary 

2 

ml) Mobile 

Cramming 

An FTC Staff Report 

July 2014 
Mobile Cramming
 

An FTC Staff Report
 

July 2014 

Federal Trade Commission 

Edith Ramirez, Chairwoman
 

Julie Brill, Commissioner
 

Maureen K. Ohlhausen, Commissioner
 

Joshua D. Wright, Commissioner
 

Terrell McSweeny, Commissioner
 
 

 

 

Mobile Cramming: An FTC Staff Report 

REPORT CONTRIBUTORS
 

Heather Allen, Attorney, Division of Financial Practices 

Duane Pozza, Attorney, Division of Financial Practices 

James Trilling, Attorney, Division of Privacy and Identity Protection 

Patricia Poss, Attorney, Mobile Technology Unit 

Stephanie Rosenthal, Attorney, Division of Financial Practices 

Andrew Schlossberg, former Program Specialist, Division of Financial Practices 

Patrick Eagan-Van Meter, Program Specialist, Division of Financial Practices 

Eric Rodrigues, Paralegal, Division of Financial Practices 

TJ Peeler, Visual Information Specialist, Division of Consumer and Business Education 

Carrie Gelula, Visual Information Specialist, Division of Consumer and Business Education 

Malini Mithal, Assistant Director, Division of Financial Practices 

James Reilly Dolan, Associate Director, Division of Financial Practices 

Jessica Rich, Director, Bureau of Consumer Protection 

Katherine Fallow, Deputy Director, Bureau of Consumer Protection 

Katherine Race Brin, Senior Advisor to the Director, Bureau of Consumer Protection 

Molly Crawford, Senior Advisor to the Director, Bureau of Consumer Protection 

We also thank James Lacko, Deputy Assistant Director, and Devesh Raval, Economist, of the Division 

of Consumer Protection of the Bureau of Economics, for their contributions to this report. 
 

 

 

Mobile Cramming: An FTC Staff Report 

TABLE OF CONTENTS 

EXECUTIVE SUMMARY ......................................................................................................................... I
 

I. INTRODUCTION ...........................................................................................................................1
 

II. MOBILE THIRD-PARTY BILLING..............................................................................................2
 

A. Uses of Mobile Carrier Billing ............................................................................................2
 

B. Types of Carrier Billing Arrangements ...............................................................................4
 

C. Market Participants ..............................................................................................................5
 

III. THE MOBILE CRAMMING PROBLEM ......................................................................................7
 

A. What is Cramming? .............................................................................................................7
 

1. FTC Actions Addressing Mobile Cramming...........................................................8
 

2. Other Federal and State Initiatives Addressing Mobile Cramming.......................11
 

B. Prevalence of Mobile Cramming.......................................................................................13
 

1. Carrier Refund Rates..............................................................................................13
 

2. Complaint Information...........................................................................................14
 

3. Other Efforts to Estimate the Extent of Cramming ...............................................15
 

4. Unreported Consumer Injury .................................................................................17
 

C. International Views............................................................................................................18
 

IV. STRATEGIES TO REDUCE MOBILE CRAMMING ................................................................19
 

A. Allowing Consumers to Avoid Third-Party Charges to Mobile Accounts........................20
 

1. Current Industry Practices......................................................................................20
 

2. FTC Staff Recommendations.................................................................................21
 

B. Strategies to Detect and Prevent Mobile Cramming..........................................................22
 

1. Avoiding Deceptive Practices That Lead to Unauthorized Mobile Charges.........22
 

a. Industry Practices.......................................................................................22
 

b. Staff Recommendations.............................................................................25
 

2. Obtaining Consumers’ Express, Informed Consent...............................................27
 
 

 

Mobile Cramming: An FTC Staff Report 

a. Current Industry Practices..........................................................................27
 

b. Staff Recommendations.............................................................................29
 

C. Adequate Disclosures of Third-Party Charges ..................................................................30
 

1. Current Industry Practices......................................................................................31
 

2. Staff Recommendations.........................................................................................31
 

D. Consumer Dispute Protections and Refunds......................................................................32
 

1. Current Industry Practices......................................................................................32
 

2. Staff Recommendations.........................................................................................34
 

CONCLUSION..........................................................................................................................................35
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mobile Cramming: An FTC Staff Report 

EXECUTIVE SUMMARY
 

The widespread adoption of mobile devices has provided many important benefits to consumers, 

including the convenience of paying for goods and services using a phone. One mobile payment option 

is known as “carrier billing” – the ability to charge a good or service directly to a mobile phone account. 

Industry observers have noted the potential usefulness of carrier billing to consumers, and the industry 

continues to devote resources to promoting carrier billing as a payment option. As stakeholders have 

noted, carrier billing of third-party charges may be particularly beneficial for unbanked and underbanked 

consumers. Additionally, consumers have used text messages to donate funds to a charitable 

organization, with the charge placed on their mobile phone account. 

As carrier billing has developed, however, fraud has become a significant problem for 

consumers. In particular, mobile cramming – the unlawful practice of placing unauthorized third-party 

charges on mobile phone accounts – is a significant concern. Mobile cramming occurs when consumers 

are signed up and billed for third-party services, such as ringtones and recurring text messages 

containing trivia or horoscopes, without their knowledge or consent. In six recent enforcement actions, 

the Commission has alleged that such practices have cost consumers many millions of dollars, and in 

just three of these actions, defendants have agreed to orders imposing judgments totaling more than 

$160 million. 

As part of its consumer protection mission, the Federal Trade Commission (“FTC” or 

“Commission”) works to ensure that consumer protections keep pace with developing technologies and 

payment mechanisms. In late 2013, following a Commission roundtable on mobile cramming and a 

number of FTC and state enforcement actions highlighting the prevalence of mobile cramming, the four 

largest mobile carriers stated that they would discontinue one form of carrier billing for commercial 

transactions – “Premium SMS” billing. Market participants continue to implement other kinds of carrier 

billing arrangements, however. In doing so, it is imperative that they keep in mind the same 

fundamental consumer protection principles that apply regardless of the type of technology used for 

billing. All stakeholders have an interest in combating cramming on the carrier billing platform, as 

promoting consumer trust is integral to promoting more widespread adoption of mobile payment 

systems and further innovation. 

Based on evidence reviewed to date, FTC staff recommends certain best practices for industry 

participants to protect consumers against unwanted charges while enabling innovation and consumer 

access to another payment mechanism. 

First, mobile carriers should give consumers the option to block all third-party charges on 

their phone accounts. At activation, carriers should inform consumers that third-party charges may be 

placed on their mobile accounts and carriers should give consumers the opportunity to block all charges 

at that time. Carriers should also clearly and prominently inform consumers of options to block charges 

from third parties while accounts are active, including on the carriers’ websites. Additionally, carriers 

should consider offering consumers the ability to block or allow only specific providers, or to block 

commercial providers only. 

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Mobile Cramming: An FTC Staff Report 

Second, advertisements for products or services charged to a mobile bill must not be 

deceptive. Merchants are in the first instance responsible for ensuring that their practices – including 

any advertising, marketing, and opt-in processes – are not deceptive. Information about price should be 

disclosed clearly and conspicuously before charging a consumer's mobile account. Further, carriers 

should implement reasonable procedures to scrutinize risky or suspicious merchants and terminate or 

take other appropriate steps against companies engaging in unlawful practices. Such scrutiny should 

also be applied if a carrier becomes aware that a merchant has run an earlier campaign containing 

deceptive advertising or engaged in unauthorized billing on landline phones. 

Third, it is critical that consumers provide their express, informed consent to charges 

before they are billed to a mobile account, and that reliable records of such authorizations are 

maintained. The unreliability of many merchants’ claims that they have obtained consumer consent 

suggests that more centralized control by carriers and intermediaries of the consumer opt-in process and 

authorization records is needed. Mobile carriers should implement policies, or strengthen existing 

polices, to investigate and take appropriate action when consumer refund requests, complaints, or other 

factors indicate that a merchant may be cramming charges without consumers’ consent. 

Fourth, all charges for third-party services should be clearly and conspicuously disclosed to 

consumers in a non-deceptive manner. In particular, on a phone bill, the name of the service and any 

associated bill heading should relate to the product offered and not suggest an affiliation with the 

carrier’s service. Carriers should consider ways to make third-party charges more conspicuous, such as 

by providing separate subtotals for carrier and third-party charges wherever total charges are disclosed. 

Carriers also should consider whether consumers who auto-pay their bills would benefit from receiving 

a separate notification of third-party charges. Further, consumers with prepaid phone plans who do not 

typically receive phone bills should receive such a notification from the carrier. 

Fifth, carriers should implement an effective dispute resolution process. Such a process 

should be clear and consistent and enable consumers to dispute suspicious charges on their mobile 

accounts and obtain refunds for unauthorized charges. Consumers have reported difficulties and 

inconsistent experiences with carriers’ dispute resolution policies for third-party charges. Further, given 

the extensive evidence that consumers are often unaware of third-party charges on their phone bills, 

carriers should grant consumer refund requests for recurring unauthorized charges that the carrier 

concludes were crammed, including refunds for the same recurring charge in previous months to the 

extent it is practicable to identify those prior charges. When a carrier terminates a third party’s billing 

activities due to unauthorized charges, the carrier should notify consumers who incurred charges from 

the third party to allow them to request a refund. 

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Mobile Cramming: An FTC Staff Report 

I. INTRODUCTION 

In recent years, the use of mobile devices has grown so rapidly that mobile devices now 

outnumber people in the United States, and nearly as many people have a mobile phone as have a bank 

account.1 Given these facts, it is no surprise that companies are increasingly offering consumers ways 

to charge payments for third-party goods and services to their mobile phone accounts – a payment 

method often referred to as “mobile carrier billing” or “carrier billing.” Indeed, carrier billing has been 

estimated to be the most popular mobile payment system in use in the world today.2 This payment 

method offers many potential benefits for consumers who want to use their mobile phones to pay for 

goods and services and who prefer that the charges be placed on their phone bill rather than on a credit 

or debit card, for example. In fact, carrier billing may be especially beneficial for unbanked and 

underbanked consumers. 

Carrier billing, however, can also raise concerns that the practice will be misused to charge 

consumers for items without their consent. This concern has been borne out in consumer complaints 

and other evidence indicating that in many cases consumers have not authorized charges that have been 

billed to their phone accounts. Unauthorized third-party charges on mobile phone accounts – a practice 

known as “mobile cramming” – occurs when consumers are enrolled and billed for third-party services, 

such as ringtones and recurring text messages containing trivia or horoscopes, without the consumers’ 

knowledge or consent. Third parties either obtain consumers’ phone numbers and falsely claim that the 

consumers have signed up for services and authorized charges, or use deceptive means to obtain 

consumers’ mobile phone numbers – such as by offering free prizes – and then begin charging 

consumers’ phone accounts for recurring third-party charges for purported services unrelated to the 

offer. These charges often are difficult to locate in phone bills, and many consumers do not notice them 

or do not understand that such charges are associated with an item unrelated to their phone service. 

Further, many consumers do not even receive the supposed services for which they are being charged. 

Mobile cramming thus harms consumers and also undermines the use of carrier billing as a legitimate 

payment option. As carrier billing is an emerging payment method being actively promoted by carriers, 

it is in the interest of all stakeholders to take proactive steps now to ensure its reliability and foster 

consumer trust to enable the payment method to reach its full potential. 

For the past two decades, one of the top priorities at the FTC has been ensuring that consumer 

protections keep pace with emerging technologies, including mobile technologies. Among other things, 

the FTC has brought enforcement actions to combat mobile cramming and provide restitution to injured 

1 See Cecilia Kang, A Nation Outnumbered By Gadgets, WASHINGTON POST, Oct. 12, 2011 available at 

http://www.washingtonpost.com/business/economy/a-nation-outnumbered-bygadgets/2011/10/11/gIQAhjdhdL_story.html; BD. OF GOVERNORS OF THE FED. RESERVE, CONSUMER AND 

MOBILE FINANCIAL SERVICES 2014, 4-5 (2014), available at 

http://www.federalreserve.gov/econresdata/consumers-and-mobile-financial-services-report-201403.pdf 

[hereinafter “MOBILE FINANCIAL SERVICES REPORT”].
 2 See Cary Stemle, Direct Carrier Billing: The world’s most popular mobile payment, MOBILE PAYMENTS TODAY
 

(Oct. 15, 2013) http://www.mobilepaymentstoday.com/blog/11377/Direct-Carrier-Billing-The-world-s-mostpopular-mobile-payment-Infographic.
 

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Mobile Cramming: An FTC Staff Report 

consumers, 

3 recommended the adoption of certain baseline consumer protections,4 and encouraged 

public dialogue among industry stakeholders to identify potential solutions. To advance that dialogue, 

on May 8, 2013, the FTC convened a roundtable of industry participants, consumer advocates, 

regulators, and other interested parties to discuss and gather information about potential approaches to 

combat mobile cramming (the “roundtable”). 

5 

This FTC staff report addresses mobile carrier billing and summarizes information from the 

roundtable and public comments submitted in connection with the roundtable; data obtained from public 

sources; and evidence from the FTC’s enforcement actions as well as multiple enforcement actions 

brought by states. It also recommends certain best practices for industry participants to protect 

consumers against mobile cramming. Specifically, Part II of this report describes mobile third-party 

billing, including the types of entities involved in the industry. Part III describes mobile cramming and 

its prevalence. Part IV describes current strategies used to combat mobile cramming and FTC staff’s 

views on whether additional action is needed. 

II. MOBILE THIRD-PARTY BILLING 

This section describes the potential uses of carrier billing, the types of carrier billing, and the 

different market participants involved. 

A. Uses of Mobile Carrier Billing 

As discussed in the FTC’s March 2013 staff report on mobile payments and at the roundtable, 

major phone carriers permit consumers to charge payments for third-party goods and services directly to 

their mobile phone accounts, which is known generally as “mobile carrier billing” or just “carrier 

billing,”6 as an alternative to paying for an item with a credit or debit card, for example. 

3 FTC v. T-Mobile USA, Inc., No. 2:14-cv-00967-JLR (W.D. Wash.); FTC v. Wise Media, LLC, No. 1:13-cv1234-WSD (N.D. Ga.); FTC v. Jesta Digital, LLC, No. 1:13-cv-01272-JDB (D.D.C.); FTC v. Tatto, Inc., No. 

2:13-cv-08912-DSF-FFM (C.D. Cal.); FTC v. Acquinity Interactive, LLC, No. 0:14-cv-60166-RNS (S.D. Fla.) 

(amended complaint filed June 16, 2014); FTC v. MDK Media, Inc., No. 2:14-cv-05099-JFW-SH (C.D. Cal.). 

4 See Reply Comment of the Fed. Trade Comm’n, FCC CG Docket No. 11-116 (July 20, 2012), at 7, 12, available 

at http://www.ftc.gov/sites/default/files/documents/advocacy_documents/ftc-reply-comment-federalcommunications-commission-concerning-placement-unauthorized-charges/120723crammingcomment.pdf 

[hereinafter “FTC Reply Comment”]. 5 See Press Release, Fed. Trade Comm’n, FTC to Host Mobile Cramming Roundtable May 8 (Mar. 8, 2013), 

available at http://www.ftc.gov/news-events/press-releases/2013/03/ftc-host-mobile-cramming-roundtable-may-8. 6 See FED. TRADE COMM’N STAFF, PAPER, PLASTIC... OR MOBILE? AN FTC WORKSHOP ON MOBILE PAYMENTS 

7-8 (2013), available at http://www.ftc.gov/sites/default/files/documents/reports/paper-plastic-or-mobile-ftcworkshop-mobile-payments/p0124908_mobile_payments_workshop_report_02-28-13.pdf [hereinafter “FTC 

MOBILE PAYMENTS REPORT”]. See also Sprint Nextel, Comments for the FTC Mobile Cramming Roundtable 

(May 6, 2013), at 1, available at 

http://www.ftc.gov/sites/default/files/documents/public_comments/2013/05/564482-00008-85922.pdf, 

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Mobile Cramming: An FTC Staff Report 

Roundtable participants and other industry observers have noted the potential usefulness of 

mobile carrier billing to consumers. Carrier billing of third-party charges may be useful for consumers 

who do not have credit cards, or do not want to use them, especially for small transactions. In this way, 

carrier billing may be beneficial for unbanked and underbanked consumers.7 One roundtable participant 

also noted that this payment channel may be an appealing way of transacting for members of the 

millennial generation, who have grown up in a mobile-centric world and may often use a mobile phone 

as a primary way to make electronic payments.

8 

In the commercial context, consumers have been able to use carrier billing to pay for such items 

as text message-based subscription services and digital goods such as virtual currency in a mobile game 

app. In the charitable context, consumers have used text messages to donate funds to a charitable 

organization, such as in the aftermath of a natural disaster, with the charge placed on their mobile phone 

bill.9 Additionally, consumers have made political contributions by sending text messages and having 

the charges placed on their mobile phone bills.10 

[hereinafter “Sprint Nextel Comments”]; Verizon Wireless, Written Comments for the FTC Mobile Cramming 

Roundtable (May 8, 2013), at i, available at 

http://www.ftc.gov/sites/default/files/documents/public_comments/2013/05/564482-00010-85928.pdf, 

[hereinafter “Verizon Wireless Comments”]; Manage Mobile Purchases and Subscriptions, AT&T, 

http://www.att.com/esupport/article.jsp?sid=52709&cv=820&title=AT#fbid=1T6cx3Wnq50 (last visited July 23, 

2014). “Mobile billing” and “carrier billing” refer herein to the general practice of charging a consumer’s phone 

account for third-party services, whether or not the consumer receives a bill. As noted at III.A, infra, many 

consumers, such as consumers with prepaid accounts, do not actually receive a bill. 

7 See MOBILE FINANCIAL SERVICES REPORT, supra note 1, at 1-2, 5. Beyond the United States, carrier billing 

may be the only available electronic payment channel for 1.7 billion people in the world who own a mobile phone 

but do not have a bank account. See, e.g., Oded Israeli, The “3x factor” of carrier billing in app store purchases, 

MOBILE PAYMENTS TODAY (Feb. 1, 2013) http://www.mobilepaymentstoday.com/blog/9789/The-3X-factor-ofcarrier-billing-in-app-store-purchases. 8 See Transcript of the Fed. Trade Comm’n Mobile Cramming Roundtable (May 8, 2013), J. Greenwell, 

BilltoMobile, at 17, available at 

www.ftc.gov/sites/default/files/documents/public_events/Mobile%20Cramming%20Roundtable/30508mob.pdf 

[hereinafter “FTC Roundtable transcript”]; see also id., M. Niejadlik, Boku, Inc., at 135. References to the FTC 

Roundtable transcript identify the speaker, the transcript page, and, at the first reference to a particular speaker, 

the speaker’s place of employment. 

9 See FTC Roundtable transcript, J. Manis, Mobile Giving Found., at 15-16; id., J. Breyault, National Consumers 

League, at 31; id., D. Asheim, Give by Cell, at 131-32. See also AARON SMITH, PEW INTERNET PROJECT, REAL 

TIME CHARITABLE GIVING: WHY MOBILE PHONE USERS TEXTED MILLIONS OF DOLLARS IN AID TO HAITI 

EARTHQUAKE RELIEF AND HOW THEY GOT THEIR FRIENDS TO DO THE SAME (Jan. 12, 2012), available at 

http://www.pewinternet.org/~/media//Files/Reports/2012/Real%20Time%20Charitable%20Giving.pdf. 10 See FTC Roundtable transcript, A. Sege, mQube, at 142. See also Derek Johnson, Political Campaign Text 

Message Donations – What You Need To Know, TATANGO (June 11, 2012), 

http://www.tatango.com/blog/political-campaign-text-message-donations-what-you-need-to-know/. 

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Mobile Cramming: An FTC Staff Report 

B. Types of Carrier Billing Arrangements 

Historically, third-party charges have often involved a text-messaging component, whereby a 

consumer purportedly authorizes charges by texting a particular five or six-digit number known as a 

“short code.” Typically, in authorized transactions, the consumer initiates a transaction by sending a 

text message to a short code or entering his or her phone number on a website. The consumer then 

receives a text message with additional information about the good or service offered, and the consumer 

responds to confirm the charge, such as by sending a confirmatory response text. This type of mobile 

carrier billing is called “Premium SMS” billing, as text messages are also known as “SMS” (“short 

message service”) messages. 

Since the adoption of smartphones with advanced mobile web browsing capabilities and the 

more widespread use of mobile apps, there has been an increasing use of other forms of carrier billing 

arrangements, known as “direct carrier billing” (or “DCB”) arrangements. In DCB arrangements, a 

consumer does not necessarily need to send or receive a text message to initiate or complete a 

transaction that is billed to a mobile account. Instead, a consumer can initiate a transaction on a mobile 

website or within a mobile app, and the merchant can have the charge placed on the consumer’s mobile 

account through back-end arrangements that involve the mobile carriers. 

In the past few years, commercial Premium SMS billing has generated billions of dollars of 

revenue, and one industry participant estimated that third-party charges on mobile bills constituted a $2 

to $3 billion dollar annual market.11 Several roundtable panelists, however, suggested that the Premium 

SMS market had been declining in size over the last few years, and that one key reason for this is the 

emergence of mobile apps, which allow consumers to obtain content (such as ringtones) that they may 

have previously purchased using Premium SMS.12 The Premium SMS market will likely continue to 

shrink because, subsequent to the FTC’s roundtable, in late 2013, the four largest mobile carriers 

pledged to discontinue Premium SMS billing for commercial transactions.

13 

In contrast, direct carrier billing, which has generated roughly $300 million in revenue annually, 

is expected to grow to at least $11 billion worldwide by 2016 for app store purchases alone.14 DCB 

arrangements are likely to supplant Premium SMS as the preferred mode of carrier billing, as mobile 

phone companies have continued to partner with market participants ranging from large technology 

11 See FTC Roundtable transcript, J. Greenwell, at 23; see also id., J. Breyault, at 14. 

12 See FTC Roundtable transcript, J. Manis, at 21; id., J. Greenwell, at 23, 64; id., K. McCabe, Office of Vermont 

Attorney General, at 54. 

13 Ina Fried, AT&T, Sprint, T-Mobile, Verizon Dropping Most Premium Text Service Billing in Effort to Combat 

Fraud, ALLTHINGSD.COM (Nov. 21, 2013), http://allthingsd.com/20131121/att-sprint-t-mobile-verizon-alldropping-most-premium-text-service-billing-in-effort-to-combat-fraud/. 14 See FTC Roundtable transcript, J. Greenwell, at 17, 21, 64; id., M. Niejadlik, at 184; Nick Holland & Rich 

Karpinski, Carrier Billing: The Latent Operator Opportunity, YANKEE GROUP (Aug. 21, 2012), available at 

http://www.yankeegroup.com/ResearchDocument.do?id=59249; JORDAN MCKEE, YANKEE GROUP, THE FALL OF 

PREMIUM SMS PAVES THE WAY FOR DIRECT OPERATOR BILLING DOMINANCE (Feb. 2014), 

http://bango.com/_/data/support/Fall_of_Premium_SMS.pdf?b_c=YG&b_s=1&b_ct=img. 

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Mobile Cramming: An FTC Staff Report 

platforms to smaller mobile payments companies in an effort to make DCB a viable option for mobile 

payments.15 

Regardless of the type of carrier billing involved, it is important for companies to keep basic 

consumer protections in mind, such as providing adequate disclosures containing truthful information 

and obtaining informed consent for charges. Accordingly, the consumer protection principles embodied 

in staff’s recommendations, discussed in below in Part IV, apply to any Premium SMS arrangements 

that may still exist or be resumed, DCB arrangements, or other forms of carrier billing that may emerge. 

C. Market Participants 

The process of placing a charge for third-party services on a phone account typically involves a 

number of parties, including merchants, billing intermediaries, and mobile carriers. Each of these 

market participants is under the FTC’s jurisdiction when engaged in third-party billing activities.16 

Merchants provide the goods or services for which consumers are billed on their mobile phone 

accounts. In Premium SMS arrangements, merchants are often known as “content providers,” as many 

merchants in this area have provided text-based or digital content (such as text-based subscription 

services or ringtones) to mobile devices. DCB arrangements can be used for many kinds of merchant 

transactions in which consumers can choose a carrier billing option in lieu of another kind of payment 

mechanism, like a credit card. Roundtable participants identified, as examples, merchants that use DCB 

to sell credits on dating, gaming, or social networking sites.17 

Merchants sign up with intermediaries that have contractual agreements with mobile carriers to 

place charges on mobile phone accounts. In Premium SMS arrangements, these companies often are 

known as “aggregators.”18 A range of companies acting as billing intermediaries have begun to move 

15 See, e.g., FTC Roundtable transcript, J. Greenwell, at 17, 21, 64; id., M. Niejadlik, at 135, 184; Jessie Xu,
 

FACEBOOK, Helping Monetize the Mobile Web (June 6, 2012), available at
 

https://developers.facebook.com/blog/post/2012/06/06/helping-monetize-the-mobile-web/; Mobile Operator
 

Billing, MICROSOFT, http://msdn.microsoft.com/enus/library/windowsphone/help/jj215902%28v=vs.105%29.aspx (last visited July 23, 2014).
 16 See FTC MOBILE PAYMENTS REPORT, supra note 6 at 2-3; FTC v. Verity Int’l, Ltd., 443 F.3d 48, 59-60 (2d Cir. 

2006); In re Detariffing of Billing and Collection Servs., 102 F.C.C.2d 1150 ¶¶ 30-34 (1986).
 17 See FTC Roundtable transcript, J. Greenwell, at 17, 20-21; id., M. Niejadlik, at 135-36.
 18 All Aggregators, COMMON SHORT CODE ADMINISTRATION, http://www.usshortcodes.com/partners/find-a-smsmarketing-partner.php#aggregators-tab (last visited July 23, 2014). 

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Mobile Cramming: An FTC Staff Report 

into the DCB space.

19 The consumer may or may not directly interact with the billing intermediary at 

all. 

Mobile carriers bill consumers for these transactions, and the carriers get a portion of the 

consumer payment. The percentage kept by mobile carriers in third-party billing arrangements varies, 

though in at least one case (Wise Media) the carriers received 30-40% of the amount charged to 

20 

consumers. 

A diagram of the billing process is depicted below: 

19 See FTC Roundtable transcript, J. Greenwell, at 17; id., M. Niejadlik, at 135-136; id., A. Sege, at 143. 

Companies such as Facebook and Skype have partnered with intermediaries to enable carrier billing in some 

circumstances on their platforms. See Ingrid Lunden, Facebook Mobile Payment Via Carrier Billing (and Bango) 

Live In U.S., UK and Germany, TECHCRUNCH (Sept. 24, 2012), http://techcrunch.com/2012/09/24/facebookmobile-payments-via-carrier-billing-and-bango-now-live-in-u-s-uk-and-germany/; Ingrid Lunden, Skype Gets 

Closer to Mobile Carriers, Inks Deal With Mach For Direct Billing For Skype Credits, TECHCRUNCH (Sept. 5, 

2012), http://techcrunch.com/2012/09/05/skype-gets-closer-to-carriers-inks-deal-with-mach-for-direct-billing/. 20 See Declaration of Andrew R. Schlossberg (Dkt. #3-1), FTC v. Wise Media, LLC, No. 1:13-cv-01234-WSD 

(N.D. Ga. Apr. 16, 2013), at FTC 1 - 000017, ¶ 38 [hereinafter “Wise Media Declaration”]; see also Complaint 

for Permanent Injunction and Other Equitable Relief, FTC v. T-Mobile USA, Inc., No. 2:14-cv-00967 (W.D. 

Wash. July 1, 2014), ¶ 10 [hereinafter “T-Mobile Complaint”] (alleging that T-Mobile retained typically at least 

35% of the charge and in some cases as high as 40%). 

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Mobile Cramming: An FTC Staff Report 

III. THE MOBILE CRAMMING PROBLEM 

As the FTC, consumer advocates, and other law enforcement and regulatory authorities have 

observed, mobile cramming has become a significant problem. Part A of this section discusses what 

mobile cramming is and provides illustrations of how cramming occurs in the mobile context. Part B 

discusses the evidence demonstrating the extent of mobile cramming. Part C discusses the experiences 

of other countries in dealing with cramming. 

A. What is Cramming? 

Cramming is the placement of an unauthorized third-party charge on a phone account.21 

Cramming on landline phone bills has been a problem for many years – likely costing consumers 

billions of dollars in the last decade.22 The FTC has brought over thirty cases to stop landline cramming 

and return money to consumers.23 As mobile phones have proliferated in recent years, cramming has 

emerged as a problem in the mobile arena. 

Cramming takes advantage of the fact that many consumers do not know that third-party charges 

can appear on their phone bills; do not notice the charges, which are often buried in the bill under vague 

terms such as “usage charges”

24 

or “monthly service charges” or other terms that suggest a connection 

to the carrier;25 or, in the case of consumers with prepaid plans, do not receive a bill at all. Cramming 

occurs when consumers are signed up and billed for third-party services by merchants, either without 

any affirmative action by the consumers or after the consumer takes some affirmative act (such as 

clicking on a mobile webpage or providing a mobile phone number) without understanding that a charge 

to a mobile phone account will result. Consumers who receive a monthly bill for their mobile accounts 

21 This report does not address unauthorized carrier charges on mobile phone bills.
 22 MAJORITY STAFF OF S. COMM. ON COMMERCE, SCI., & TRANSP., OFFICE OF OVERSIGHT & INVESTIGATIONS,
 

UNAUTHORIZED CHARGES ON TELEPHONE BILLS (July 12, 2011), at ii, available at
 

http://www.commerce.senate.gov/public/?a=Files.Serve&File_id=3295866e-d4ba-4297-bd26-571665f40756 

[hereinafter “S. COMMERCE COMM. CRAMMING REPORT”].
 23 See, e.g., FTC v. Inc21.com Corp., 745 F. Supp. 2d 975 (N.D. Cal. 2010), aff’d, 2012 WL 1065543 (9th Cir. 

Mar. 30, 2012); FTC v. Hold Billing Servs., Ltd., No. 98-cv-00629-FB (W.D. Tex.) (contempt motion filed March
 

28, 2012); FTC v. Nationwide Connections, Inc., No. 06-80180 (S.D. Fla. Sept. 18, 2008) (stipulated final order);
 

FTC v. Websource Media, LLC, No. H-06-1980 (S.D. Tex. July 17, 2007) (stipulated final order); FTC v. Epixtar
 

Corp., No. 03-8511 (S.D.N.Y. Nov. 29, 2006) (stipulated final order); FTC v. Mercury Mktg. of Del., Inc., No.
 

00-3281, 2004 WL 2677177 (E.D. Pa. Nov. 22, 2004); FTC v. 800 Connect, Inc., No. 03-CIV-60150 (S.D. Fla. 

Feb. 4, 2003) (stipulated final order); FTC v. Access Resource Servs., Inc., No. 02-CIV-60226 (S.D. Fla. Nov. 4, 

2002) (stipulated final order); FTC v.Cyberspace.com, LLC, No. C00-1806L, 2002 WL 32060289 (W.D. Wash. 

July 10, 2002), aff’d, 453 F.3d 1196 (9th Cir. 2006).
 24 See, e.g., Wise Media Declaration, supra note 20, at Exs. FTC 71, FTC 72, FTC 73. 

25 See, e.g., id. at Exs. FTC 66, FTC 78; Exhibits PX 12, PX19 to Exhibits in Support of Plaintiff’s Ex Parte
 Application for a Temporary Restraining Order (Dkt. #12), FTC v. Tatto, Inc., No. 2:13-cv-08912-DSF-FFM 

(C.D. Cal. Dec. 5, 2013). 

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frequently overlook the charges and pay their phone bills in full.26 Many consumers may also use auto 

bill-pay or paperless billing, and/or have family plans that cost a hundred or more dollars each month, 

making them less likely to notice small charges on their bills.27 And some prepaid mobile phone 

consumers do not receive a bill at all – crammed charges are simply deducted from their prepaid 

balance. 28 As many have pointed out, this ability to charge many consumers without their detecting it 

makes mobile cramming “almost the perfect scam.”29 

1. FTC Actions Addressing Mobile Cramming 

Three recent FTC cases in which the FTC reached settlements with content providers alleged to 

be engaged in cramming illustrate several ways that cramming occurs: 

•	 Wise Media LLC. The FTC filed suit in April 2013 against merchant Wise Media, LLC, 

which purported to sell recurring subscriptions to text message services providing “love 

tips,” horoscopes, diet tips, and similar kinds of “alerts” for $9.99 a month.30 The company 

claimed that consumers signed up for the services by entering their information into websites, 

receiving PIN codes by text messages, and inputting the PINs into the websites. Consumers 

who discovered the charges, however, widely reported that they had never heard of Wise 

Media or signed up for the services, suggesting they were simply billed without 

authorization.31 In November 2013, a court entered a stipulated order with a judgment for 

26 See, e.g., Inc21.com, 745 F. Supp. 2d at 1001; Memorandum in Support of Motion for Temporary Restraining 

Order, at 10-11, FTC v. Wise Media, LLC, No. 1:13-cv-1234-WSD (N.D. Ga. Apr. 16, 2013) [hereinafter “Wise 

Media TRO Memo”]; FTC Roundtable transcript, A. Sege, at 145; id., J. Chilsen, Citizens Utility Board, at 73; 

id., C. Witteman, California Public Utilities Commission, at 100; id., P. Singer, Office of Texas Attorney General, 

at 102. 

27 See FTC Roundtable transcript, J. Breyault, at 31-32; Brad Tuttle, Groceries or Mobile Phone? Plenty of 

Consumers Spend More on the Latter, TIME MAGAZINE, Sept. 13, 2012, available at 

http://business.time.com/2012/09/13/groceries-or-mobile-phone-plenty-of-consumers-spend-more-on-the-latter/ 

(noting that nearly half of Americans with mobile phones said their monthly bill comes to $100 or more per
 

month); Anton Troianovski, Cellphones Are Eating the Family Budget, WALL ST. J., Sept. 28, 2012, available at
 

http://online.wsj.com/article/SB10000872396390444083304578018731890309450.html.
 28 See, e.g., Cricket Wireless Terms and Conditions of Service, CRICKET WIRELESS,
 

https://www.cricketwireless.com/terms (last visited July 23, 2014); Choose a Prepaid Plan. Pick Your Device, 

View Plan Details, VERIZON WIRELESS,
 

http://www.verizonwireless.com/b2c/prepay/processPrePayRequest.do?type=ppmonthBASIC (last visited July 

23, 2014).
 29 See, e.g., FTC Roundtable transcript, J. Breyault, at 32; see also id., J. Chilsen, at 72-73.
 30 Complaint for Permanent Injunction and Other Equitable Relief, at 7-8, FTC v. Wise Media, LLC, No. 1:13-cv1234-WSD (N.D. Ga. Apr. 16, 2013), available at
 

http://www.ftc.gov/sites/default/files/documents/cases/2013/04/130417wisemediacmpt.pdf. 31 See Wise Media TRO Memo, supra note 26, at 6-9.
 

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Mobile Cramming: An FTC Staff Report 

more than $10 million and a ban that prohibits Wise Media from placing charges on mobile 

phone bills altogether.32 

•	 Jesta Digital, LLC. In this case, filed in August 2013, the FTC alleged that the defendant 

lured consumers into purchasing a monthly subscription for ringtones using deceptive 

practices.33 According to the complaint allegations, some consumers saw banner ads on their 

mobile devices that falsely claimed a virus had been detected. Clicking on the ad led to a 

screen with a button stating “Get Now” above the phrase “Protect your Android [phone] 

today.” Consumers who clicked “Get Now,” and then a button on a subsequent page marked 

“Subscribe,” were then subscribed to the $9.99 per month ringtone subscription plan, though 

the nature and cost of the subscription were never adequately disclosed. Indeed, some 

consumers were subscribed even if they clicked on parts of the screen other than the 

“subscribe” button. Moreover, if consumers actually attempted to subscribe and download 

Jesta’s so-called anti-virus software to their mobile devices, the download often failed. Jesta 

used a process known as WAP or Wireless Access Protocol billing,34 which captures 

consumers’ phone numbers from a mobile device, to obtain consumers’ purported 

authorization for the charges. Thus, consumers never even entered their phone number prior 

to being billed.35 

•	 Tatto, Inc. & Bullroarer, Inc. In a third case, filed in December 2013, the FTC alleged that 

another widespread mobile cramming operation engaged in similar deceptive practices. For 

example, the FTC alleged that the defendants ran websites that promised consumers offers 

such as free Justin Bieber tickets.36 When consumers attempted to claim these offers, they 

were asked for a mobile phone number. After following the instructions provided, 

consumers did not receive the Justin Bieber tickets, yet, the Commission has alleged, it is 

32 Stipulated Order for Permanent Injunction and Monetary Judgment Against Defendants Brian M. Buckley and 

Wise Media, LLC, at 4-6, FTC v. Wise Media, LLC, No. 1:13-cv-1234-WSD (N.D. Ga. Nov. 22, 2013), available
 

at http://www.ftc.gov/sites/default/files/documents/cases/131121wisemediabuckleystip.pdf [hereinafter “Wise
 

Media Settlement”].
 33 Complaint for Permanent Injunction and Other Equitable Relief, at ¶¶ 8-25, FTC v. Jesta Digital, LLC, No. 

1:13-cv-01272 (D.D.C. Aug. 20, 2013), available at
 

http://www.ftc.gov/sites/default/files/documents/cases/2013/08/130821jestacmpt.pdf [hereinafter “Jesta Digital
 

Complaint”].
 34 As discussed in note 128, infra, WAP opt-in involves consumers responding to an offer displayed on the mobile
 

web by clicking on a confirmation button from the phone two separate times. This process captures the
 

consumer’s phone number without the need for the consumer to enter it manually. 

35 See Jesta Digital Complaint, supra note 33, at ¶ 24.
 36 Complaint for Permanent Injunction and Other Equitable Relief, at 9, FTC v. Tatto, Inc., No. 2:13-cv-08912­

DSF-FFM (C.D. Cal. Dec. 5, 2013), available at 

http://www.ftc.gov/sites/default/files/documents/cases/131216bullroarercmpt.pdf.
 

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Mobile Cramming: An FTC Staff Report 

likely that consumers were instead signed up for the defendants’ subscription plans.37 The 

primary corporate defendants have agreed to a partially suspended judgment of 

$150,153,283.38 

The Commission has also pursued two recent additional actions against content providers that 

raise similar issues. In one case, the Commission has alleged that certain defendants sent text messages 

promising free $1,000 gift cards and iPads as a way to deceive consumers into “confirming” their phone 

number and entering a PIN on a website, which resulted in consumers being signed up for unwanted 

premium text messaging services and incurring charges of $9.99 per month on their mobile phone 

accounts.39 In another case, the Commission has alleged that a content provider similarly used the lure 

of “free” gift cards to collect consumers’ phone numbers and crammed consumers for subscription 

services such as horoscope alerts.40 

Additionally, the Commission recently filed suit in federal district court against T-Mobile USA, 

alleging that T-Mobile charged consumers for these kinds of monthly text message subscriptions 

purportedly offered by third-party merchants that, in many cases, were not authorized by 

consumers. The complaint alleges that T-Mobile deceptively described these charges on its phone bills 

in a manner that made it difficult for consumers to uncover them. For example, for consumers who 

reviewed an online summary of their bills, the complaint alleges the third-party charges were lumped 

together in a line item labeled “Use Charges” that could include charges for both T-Mobile’s own 

services, such as for text messages, and for third-party charges. Additionally, according to the 

complaint, T-Mobile continued to charge consumers even after becoming aware of telltale signs that the 

charges were unauthorized. The complaint alleges that T-Mobile’s internal documents showed that 

consumers were increasingly calling T-Mobile to complain about unauthorized third-party charges; that 

large numbers of consumers sought refunds and the refund rate for some subscriptions was higher than 

40% in some months; and that T-Mobile continued to charge consumers for third-party merchants for 

years after those merchants were the subject of law enforcement or other legal action for cramming, 

37 See id.; Memorandum In Support of Plaintiff’s Ex Parte Application For Temporary Restraining Order With An 

Asset Freeze and Other Equitable Relief, And Order to Show Cause Why A Preliminary Injunction Should Not 

Issue, at 12, FTC v. Tatto, Inc., No. 2:13-cv-08912-DSF-FFM (C.D. Cal. Dec. 5, 2013) [hereinafter “Tatto TRO 

Memo”]. 

38 See Stipulated Order for Permanent Injunction and Monetary Judgment Against Defendants Tatto, Inc., 

Shaboom Media, LLC, Bune, LLC, Mobile Media Products, LLC, Chairman Ventures, LLC, Galactic Media, 

LLC, Virtus Media, LLC, and Lin Miao, FTC v. Tatto, Inc., No. 2:13-cv-08912-DSF-FFM (C.D. Cal. June 11, 

2014), available at http://www.ftc.gov/system/files/documents/cases/140613bullroarerstiporder.pdf. The 

judgment was partially suspended based on defendants’ ability to pay, but the defendants that have settled to date 

have surrendered more than $10 million in assets to be used for consumer redress. 

39 Amended Complaint for Permanent Injunction and Other Equitable Relief, FTC v. Acquinity Interactive, LLC, 

No. 14-60166-CIV (S.D. Fla. June 16, 2014), available at 

http://www.ftc.gov/system/files/documents/cases/140707revenuepathcmpt.pdf. 

40 Complaint for Permanent Injunction and Other Equitable Relief, FTC v. MDK Media, Inc., No. 2:14-cv-05099­

JFW-SH (C.D. Cal. July 3, 2014). 

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news articles detailing cramming behavior, and industry auditor alerts detailing deceptive practices in 

which those merchants were engaged.41 

2.	 Other Federal and State Initiatives Addressing 

Mobile Cramming 

The FTC is joined by a number of partners in its efforts to protect against cramming. On the 

federal level, for several years the Federal Communications Commission (“FCC”) has been engaged in a 

rulemaking proceeding in which it is proposing additional truth-in-billing rules to help consumers detect 

crammed charges on phone bills, and is considering whether to extend those rules to mobile bills.42 The 

FTC has filed comments in that proceeding calling for stronger consumer protections.43 And the FCC 

recently announced it launched an investigation into T-Mobile with regard to cramming.44 

Congress also has focused on the problem of mobile cramming. The Chairman of the Senate 

Committee on Commerce, Science, and Transportation has issued requests to mobile carriers and billing 

aggregators to provide information on cramming in order for the Committee to assess potential 

legislative solutions.45 Chairman Rockefeller has noted that, based on review of public complaints by 

his staff, “[c]onsumers continue to complain that they are experiencing unauthorized charges on their 

wireless bills for ‘services’ they did not order and do not use,” and “[t]he types of so-called ‘services’ 

that are appearing on these consumers’ wireless bills . . . are alarmingly similar to the services shown to 

be fraudulent on wireline telephone bills.”46 

41 See T-Mobile Complaint, supra note 20, at ¶¶ 11-36. 

42 Public Notice, Fed. Commc’ns Comm’n, Consumer and Governmental Affairs Bureau Seeks to Refresh the
 

Record Regarding “Cramming” (Aug. 27, 2013), available at
 

http://transition.fcc.gov/Daily_Releases/Daily_Business/2013/db0827/DA-13-1807A1.pdf [hereinafter “FCC
 

Refresh the Record”].
 43 See FTC Reply Comment, supra note 4, at 1, 5-7, 12.
 44 Press Release, Fed. Commc’ns Comm’n, FCC Investigates Cramming Complaints Against T-Mobile (July 1,

2014), available at http://www.fcc.gov/document/fcc-investigates-cramming-complaints-against-t-mobile. 45 See Press Release, S. Comm. on Commerce, Science, and Transp., Rockefeller Vows to Avert Wireless 

Cramming Scams on Consumers (Mar. 1, 2013), available at
 

http://www.commerce.senate.gov/public/index.cfm?p=HearingsandPressReleases&ContentRecord_id=cd0edc13­

b355-4d4e-9619-7035329daa1a&ContentType_id=77eb43da-aa94-497d-a73f5c951ff72372&Group_id=165806cd-d931-4605-aa86-7fafc5fd3536&MonthDisplay=3&YearDisplay=2013; 

Press Release, S. Comm. on Commerce, Science, and Transp., Rockefeller Questions Billing Aggregators on 

Wireless Cramming (Mar. 22, 2013), available at 

http://www.commerce.senate.gov/public/index.cfm?p=HearingsandPressReleases&ContentRecord_id=07f5f79cf6c6-4ca7-a03b-ca76ac5d3962&ContentType_id=77eb43da-aa94-497d-a73f5c951ff72372&Group_id=165806cd-d931-4605-aa86-7fafc5fd3536&MonthDisplay=3&YearDisplay=2013. 46 See, e.g., Letter from Sen. John D. Rockefeller IV to Randall Stephenson, March 1, 2013, available at 

http://www.commerce.senate.gov/public/?a=Files.Serve&File_id=2610b9ba-a3d1-43eb-a94f-d7505f354680. 

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The states have been active in this area as well. Based on their experience reviewing complaints 

and conducting investigations and enforcement actions, the Attorneys General of 36 States, the District 

of Columbia, Guam, Puerto Rico, and the Virgin Islands submitted a comment to the FTC, in connection 

with the roundtable, urging action to address mobile cramming. The comment notes that they “continue 

to receive complaints from consumers that charges . . . appeared out of the blue on their phone bills 

without their authorization and for goods and services that the consumers neither requested nor used,”47 

pointing out that the complaints share common themes “consistent across the country and across 

time.”48 Given the scope of fraudulent conduct, the Attorneys General have noted that they are 

“concerned that, under this system, too much responsibility has been placed in the hands” of third parties 

to obtain consumers’ consent – “parties for whom there is a significant incentive to bill for services 

whether or not they have obtained authorization from consumers.”49 

Indeed, multiple state enforcement authorities have been active in combating mobile cramming. 

States, including Florida,50 New York,51 Texas,

52 and Washington,53 have targeted deceptive practices 

used to sign up consumers unknowingly for unwanted subscription services. For example, as discussed 

below in at Part IV.B.1.a, the State of Texas recently sued a mobile cramming operation that allegedly 

used deceptive means on websites and in text messages to sign up consumers for services without 

consent, and it has also filed suit against a Premium SMS aggregator, which it alleged participated in 

merchants’ deceptive practices to enroll consumers in the merchants’ programs and assisted them in 

avoiding detection by consumers.54 

47 See Nat’l Ass’n of Att’y Gen., Comments for the FTC Mobile Cramming Roundtable (June 24, 2013), at 1, 

available at http://www.ftc.gov/sites/default/files/documents/public_comments/2013/06/564482-00015-86106.pdf 

[hereinafter “NAAG Comments”]. 

48 See id. at 3-4. The Attorneys General also note that some consumers who received text messages suggesting 

they had been opted in to a service responded “STOP” but were still signed up. See id. at 11. Many of these 

themes mirror landline cramming complaints. 

49 Id. at 12.
 50 See id. at 7-8. See also, e.g., Assurance of Voluntary Compliance, In re Verizon Wireless Services LLC & Alltel
 

Commc’ns, LLC, Case Nos. L08-3-1035 & L08-3-1034 (Fla. Att’y Gen. June 16, 2009), available at
 

http://myfloridalegal.com/webfiles.nsf/WF/KGRG-7TAJQ2/$file/VerizonAVC.pdf. 51 NAAG Comments, supra note 47, at 8. 

52 See Plaintiff’s Original Petition, at ¶¶ 18-24, State of Texas v. Cellzum.com, LLC, No. D-1-GV-13-000629 

(Travis County, Tex. Dist. Ct. July 11, 2013), available at
 

https://www.oag.state.tx.us/newspubs/releases/2013/Cellzum_POP_070813.pdf.
 53 NAAG Comments, supra note 47, at 9.
 54 See Plaintiff’s Original Petition, State of Texas v. Mobile Messenger U.S. Inc., No. D-1-GV-13-001256 (Travis
 

County, Tex. Dist. Ct. Nov. 6, 2013), available at https://www.oag.state.tx.us/newspubs/releases/2013/MobileMessenger-POP.pdf [hereinafter “Mobile Messenger Complaint”].
 

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Mobile Cramming: An FTC Staff Report 

B. Prevalence of Mobile Cramming 

One of the key issues discussed by roundtable participants was the prevalence of mobile 

cramming. Publicly available information, including evidence about the rates at which consumers 

obtain refunds for mobile third-party charges and the volume of those refunds, indicates that cramming 

is a significant problem.55 This section discusses that evidence, as well as indications that these 

consumer complaints understate the full extent of actual consumer injury. 

1. Carrier Refund Rates 

Carrier refund rates for commercial third-party billing – the ratio of a carrier’s refunds to charges 

billed for a particular period of time, such as a month – have been significant. Carriers keep track of 

these refund rates and sometimes keep a greater share of the revenue from third-party charges for 

merchants that have high refund rates or a high number of consumer complaints than they do for those 

with lower refund rates or complaints.56 Between January 2011 and September 2012, mobile carriers 

reported data to the California Public Utilities Commission (CPUC) showing that the overall refund rate 

for third-party charges for California mobile consumers was approximately 12-13% each month, with a 

high of 18.6% in one month.57 Wise Media, one of the companies the FTC sued for mobile cramming, 

had refund rates exceeding 40% in some months for certain services.58 

High refund rates are often considered to be indicia of fraudulent conduct, and the refund rates 

for commercial carrier billing appear to be an order of magnitude higher than refund rates for other types 

of billing. For example, charitable donations charged to a mobile bill and processed through the Mobile 

Giving Foundation typically have a refund rate of under 1% overall.59 In the credit card industry, public 

evidence from one payment processing network shows that the average credit card chargeback rate is 

around 0.2%, and that a chargeback rate of 1% for any one merchant in a month triggers an 

55 Unless otherwise noted, the following discussion refers to cramming by commercial merchants. The FTC has 

not seen evidence to date of cramming in the context of charitable or political donations. 

56 See FTC Roundtable transcript, M. Altschul, CTIA – The Wireless Association, at 24-25; Comments of CTIA –
 

The Wireless Association, FCC CG Docket No. 11-116 (June 25, 2012), at 5-6; Comments of Sprint Nextel
 

Corporation, FCC CG Docket No. 11-116 (Oct. 24, 2011), at 7.
 57 See FTC Roundtable transcript, C. Witteman, at 91; Cal. Pub. Util. Comm’n, Letter to Melanie K. Tiano, S. 

Comm. on Commerce, Science, and Transp., Re: Inquiry Regarding Wireless California Cramming Complaint 

Data (Jan. 31, 2013), available at 

http://apps.fcc.gov/ecfs/document/view;jsessionid=ng1nRV9Wynn82QmDpwMwChl87kFMQhvhcqH5Q21ZLqg
 

b1cJN2Tn1!-1705390101!956499833?id=7022119377 [hereinafter “CPUC Letter”] (percentages extracted from
 

data in the letter). California regulations require wireless carriers to submit monthly data on third-party charges 

and refunds. See CAL. PUB. UTIL., Final Decision Adopting California Telephone Corporation Billing Rules, 

Rulemaking No. 00-02-004 (Nov. 3, 2010), Attach. A at 8 [hereinafter “CPUC Rule”].
 58 See Wise Media TRO Memo, supra note 26, at 10; Wise Media Declaration, supra note 20, at FTC 1 – 000012, 

¶ 25, Ex. 21.
 59 See FTC Roundtable transcript, J. Manis, at 58.
 

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investigation.60 Similarly, for ACH (Automated Clearing House) transactions, a 1% rate of chargebacks 

for unauthorized ACH transactions by a merchant may trigger an enforcement proceeding.61 

Carriers sometimes set threshold refund rates for disciplining merchants, such as prohibiting 

them from placing charges on consumers’ bills.62 One carrier, for example, has terminated Premium 

SMS merchants with an 8% or higher refund rate.63 Nevertheless, at least one carrier continued billing 

consumers for Wise Media charges even after the company’s monthly refund rate for some services 

exceeded 40%.64 

As high as the carrier billing refund rates are, available evidence indicates that they understate 

the extent of refund requests from consumers. On the one hand, industry representatives stated at the 

roundtable that carriers have liberal refund policies and that, in some cases, a carrier may provide a 

refund even if someone else in the complaining consumer’s household authorized the charge, or when 

the complaint is about an issue other than cramming.65 Consumers, however, have often reported 

difficulties requesting refunds for crammed charges from carriers. Many complain that carriers refuse to 

give more than two months’ worth of refunds, even if consumers learn that crammed charges have 

appeared on their bills for longer periods of time.66 In other instances, carriers have told consumers to 

contact the merchant for a refund, a request that, even if the consumer is able to make contact with the 

merchant, the merchant often denies.67 

2. Complaint Information 

Government agencies also have received a significant number of complaints related to thirdparty charges on mobile accounts. For example, the FTC’s Consumer Sentinel database shows that 

60 See FTC v. Commerce Planet, Inc., 878 F. Supp. 2d 1048, 1075 (C.D. Cal. 2012); FTC v. Grant Connect, 

LLC, 827 F. Supp. 2d 1199, 1222 (D. Nev. 2011).
 61 See NACHA – The Electronic Payments Association, NACHA Operating Rules, Art. II, § 2.17.2 (ODFI Return 

Rate Reporting) and Appendix 10 §§ 10.2.2, 10.4.3 (Initiation of a Rules Enforcement Proceeding) (2014)
 

[hereinafter “NACHA Operating Rules”]. The 2014 edition of the NACHA Rules is available at
 

www.achrulesonline.org.
 62 See FTC Roundtable transcript, J. Bruner, Aegis Mobile, at 82; id., M. Altschul, at 146.
 63 See Wise Media Declaration, supra note 20, at FTC 1 - 000012-13, ¶ 27. 

64 See id. at Ex. FTC 21.
 65 See FTC Roundtable transcript, M. Altschul, at 146, 152-53; id., M. Niejadlik, at 147-48; id., A. Sege at 149­

150; Sprint Nextel Comments, supra note 6, at 2, 6; Verizon Wireless Comments, supra note 6, at 5.
 66 See FTC Roundtable transcript, P. Singer, at 102; Wise Media Declaration, supra note 20, at Ex. FTC 69, FTC; 

JANE KOLODINSKY, CTR. FOR RURAL STUDIES, UNIV. OF VT., MOBILE PHONE THIRD-PARTY CHARGE
 

AUTHORIZATION STUDY (2013), Appendix C at 6-8, available at
 

http://www.atg.state.vt.us/assets/files/Mobile%20Phone%20ThirdParty%20Charge%20Authorization%20Study.pdf; NAAG Comments, supra note 47, at 3-4.
 67 See Wise Media TRO Memo, supra note 26, at 11-12; FTC Roundtable transcript, J. Breyault, at 55; id., P. 

Singer, at 102; NAAG Comments, supra note 47, at 4.
 

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consumers have reported over 1800 complaints of unauthorized charges on wireless bills since 2010.68 

As noted in greater detail below, while this is a significant number, the number of cramming complaints 

to the FTC likely significantly understates the actual extent of consumer injury. For example, the 

number is dwarfed by the number of refund requests to carriers.69 In the Wise Media case alone, 

evidence obtained in the FTC’s investigation showed that carriers granted over 190,000 refunds to 

consumers for Wise Media’s charges.70 And in the Tatto case, the FTC’s evidence showed that the 

carriers granted complaining consumers more than 1.2 million refunds for charges by the group of 

companies the FTC sued.71 Thus, while the FTC’s complaint database showed a total of approximately 

1800 complaints, carriers made almost 1.4 million refunds to complaining consumers in two cases alone. 

Similarly, the CPUC reports that it has never received more than 10 cramming complaints in a 

month during the 2011-2012 time period for which it provided data, which is a tiny fraction of the 

carrier refunds provided during that time. Specifically, for all of 2011 and much of 2012, the CPUC 

reports that carriers have provided no fewer than 160,000 refunds a month to California consumers and 

have sometimes provided over 300,000 refunds a month. In every month for which the total number of 

refunds was reported, carriers provided at least 20,000 times more refunds than complaints received by 

the CPUC, meaning that complaints reported to the state agency represented less than 0.005% of the 

refunds actually given in a month.72 

3. Other Efforts to Estimate the Extent of Cramming 

Other stakeholders have also sought to estimate the extent to which third-party charges are 

crammed as a percentage of the overall carrier billing market. At the roundtable, the Vermont Attorney 

General’s office presented the results of a study addressing the size and nature of the mobile cramming 

problem in Vermont. The study found that, out of a random sample of Vermont consumers who had 

incurred third-party charges on their phone bills, 60% of consumers reported that neither they nor 

anyone in their household had authorized the third-party charges listed on their bills. Over 55% said 

68 See FTC Reply Comment, supra note 4, at 5. These complaints are consistent in their content with hundreds if
 

not thousands of consumer complaints in online message boards. See, for example, the many reports of cramming
 

at www.smswatchdog.com, www.textcomplaints.com, and the forums on the carriers’ websites. According to the
 

National Association of Attorneys General, several State Attorneys General recently reviewed cramming
 

complaints received by 28 states and found over 750 mobile cramming complaints, predominantly from the last
 

few years. See NAAG Comments, supra note 47, at 2.
 69 The evidence suggests that consumers who become aware of crammed charges and take the time to complain

are far more likely to contact their carrier than government agencies.
 70 Wise Media TRO Memo, supra note 26, at 10.
 71 Tatto TRO Memo, supra note 37, at 10.
 72 CPUC Letter, supra note 57, at 2; see also FTC Roundtable transcript, C. Witteman, at 91. The State of
 

Vermont also reports that it has received around two dozen mobile cramming complaints in the last seven years,
 

but it identified hundreds of consumers whose responses indicated that they had been crammed when it
 

proactively surveyed consumers who had incurred third-party charges on their mobile phone bills. FTC
 

Roundtable transcript, K. McCabe, at 12.
 

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Mobile Cramming: An FTC Staff Report 

they were unaware of the charges until the survey.

73 The Citizens Utility Board in Illinois has also 

announced that an analysis of mobile phone lines by an outside research firm found that 44% of all 

third-party charges appeared to be fraudulent.74 

On the other hand, CTIA has criticized the methodology of the Vermont survey and submitted 

the testimony of an expert who analyzed the Vermont study on behalf of the four major mobile phone 

carriers. According to CTIA, the expert “found that the survey methodology underlying the Vermont 

Study did not comply with core principles of objective research, and further concluded that ‘the 

Vermont Study is neither a valid nor reliable measure of the extent to which, if any, Vermont mobile 

phone users have problems with unauthorized third-party charges on their bills.’”75 

Although no industry participant attempted to estimate the extent of cramming at the roundtable 

or in a public comment, industry members also have questioned the prevalence of mobile cramming. 

CTIA has stated that mobile cramming is “not a significant consumer concern,” pointing to the number 

of mobile cramming complaints reported by federal agencies and the industry’s voluntary actions to 

address cramming.76 Mobile phone carriers, including Verizon, AT&T, and Sprint, have publicly 

explained steps they have taken to prevent cramming on the mobile platform and suggest that industry 

standards are working to prevent fraud in this space.77 In addition, a representative from the Mobile 

Giving Foundation, who previously served as chairman of the Mobile Marketing Association, suggested 

at the roundtable that mobile cramming is on the decline given steps taken by the carriers.78 

Despite extensive evidence of consumers complaining to and seeking refunds for crammed 

charges, much of it developed through enforcement actions, industry representatives have not attempted 

to estimate the full extent of crammed charges based on their own data. Instead, industry representatives 

primarily rely on data about public complaints to government agencies, which, as noted above, represent 

a small fraction of actual cramming. 

73 See KOLODINSKY, supra note 66, at 6-7; FTC Roundtable Transcript, K. McCabe, at 12, 28-29. 

74 See Citizens Utility Board, Analysis: Frequency Of Cellphone ‘Cramming’ Scam Doubles In Illinois, CUB
 

Concerned Wireless Customers Targeted As Landline Laws Tighten (Dec. 4, 2012), available at
 

http://www.citizensutilityboard.org/newsReleases20121204_CellphoneCramming.html.
 75 CTIA – The Wireless Ass’n, Re: “Mobile Cramming” Roundtable, Project No. P134830, (June 24, 2013), at 1, 

available at http://www.ftc.gov/policy/public-comments/comment-564482-00016. Even if the percentage of
 

charges that were unauthorized was somewhat lower than those reported in the Vermont study, this would still 

point to a substantial volume of unauthorized third-party billing.
 76 Comments of CTIA – The Wireless Ass’n, FCC CG Docket No. 11-116 (June 25, 2012), at 3-6.
 77 See Verizon Wireless Comments, supra note 6; Sprint Nextel Comments, supra note 6. Specific industry
 

approaches are discussed in detail in Part IV, infra. 78 See FTC Roundtable transcript, J. Manis, at 15.
 

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Mobile Cramming: An FTC Staff Report 

4. Unreported Consumer Injury 

The FTC’s enforcement actions and other experience further illustrate the fact that reported 

consumer complaints and refund requests do not reflect the full extent of injured consumers. This is 

sometimes described as the level of complaints representing the “tip of the iceberg” of actual consumer 

injury.79 

•	 At the time of filing suit in FTC v. Inc21.com Corp., a landline cramming case, the FTC 

was able to point to about 280 formal consumer complaints to government agencies.80 

An expert survey conducted during the course of litigation and admitted by the court 

showed that nearly 97% of billed consumers did not authorize the charges.81 After 

prevailing in litigation, the FTC provided monetary redress to over 139,357 consumers.82 

•	 In FTC v. Wise Media, LLC, the FTC noted at the time of filing that it had received over 

100 Consumer Sentinel complaints regarding Wise Media’s monthly charges of $9.99, 

but the defendants later agreed to a stipulated judgment amount of over $10 million.83 

•	 A 2004 study by the FTC’s Bureau of Economics and Bureau of Consumer Protection 

found that only 8.4% of defrauded consumers complained to a government agency or the 

Better Business Bureau, meaning that the vast majority of fraudulent conduct is not 

officially reported to a government agency.84 

One reason that refund requests and complaints represent only a small fraction of all crammed 

charges is that many consumers do not notice charges on their phone bills, in part because the 

descriptions of the charges are often buried and uninformative. As a result, these consumers never 

submit a complaint or seek a refund at all. In the context of landline cramming, a court-accepted survey 

in the Inc21.com case found that only five percent of consumers were even aware of the unauthorized 

charges from review of their bills.85 Several panelists at the roundtable also commented that consumers 

may not know that their bills can be charged for third-party services, and that many of these small 

79 See, e.g., FTC Reply Comment, supra note 4, at 6-7; Consumers Union, Comments for the FTC Mobile
 

Cramming Roundtable (June 24, 2013), at 2-3, available at
 

http://www.ftc.gov/sites/default/files/documents/public_comments/2013/06/564482-00014-86099.pdf.
 80 See Exhibits in Support of Motion for Temporary Restraining Order, FTC v. Inc21.com Corp., No. 3:10-cv00022-WHA (N.D. Cal. Jan. 5, 2010), at Ex. 1, at 4. 

81 See FTC v. Inc21.com Corp., 745 F. Supp. 2d at 1001.
 82 See Press Release, Fed. Trade Comm’n, FTC Returns More Than $5.4 Million to Victims of Massive
 

Cramming Scam (Sept. 30, 2013), available at http://www.ftc.gov/opa/2013/09/inc21.shtm.
 83 See Wise Media Declaration, supra note 20, at FTC 1 - 000013-14, ¶ 30; Wise Media Settlement, supra note
 

32, at 6. The judgment was partially suspended based on defendants’ ability to pay.
 84 FED. TRADE COMM’N STAFF, CONSUMER FRAUD IN THE UNITED STATES: AN FTC SURVEY (2004), available at
 

http://www.ftc.gov/sites/default/files/documents/reports/consumer-fraud-united-states-ftcsurvey/040805confraudrpt.pdf. 85 See Inc21.com Corp., 745 F. Supp. 2d at 1001.
 

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charges can be labeled deceptively.86 In the Wise Media case, for example, consumers complained that 

the charges were buried in lengthy phone bills (for example, a $9.99 charge was listed on page 18 of one 

consumer’s bill).87 In another case, the allegedly crammed charge was listed on page 123 of a 

consumer’s online bill.88 Third-party charges have often been placed in the bill under vague terms such 

as “usage charges” or “monthly service charges” or other terms that suggest a connection to the 

carrier.89 Additionally, some consumers, such as those with prepaid mobile phone plans, may not 

receive a bill at all.

90 

C. International Views 

Consumer protection authorities outside the United States have sought to combat unauthorized 

third-party charges on consumers’ mobile phone bills as well. For instance, Canada’s Competition 

Bureau filed a court action in fall 2012 against three of the major Canadian mobile phone carriers for 

misleading conduct related to Premium SMS charges.91 In the United Kingdom, regulators recently 

have seen a surge in cramming complaints and thus have initiated a series of investigations and have 

imposed a number of fines.92 Consumers in other countries, like Australia, Russia, and China, have 

experienced similar problems.93 The London Action Plan, an international anti-spam network 

consisting of 27 countries around the world, released a report in October 2012 called “Best Practices to 

86 See FTC Roundtable transcript, A. Sege, at 145; id., C. Witteman, at 100; id., P. Singer at 86-87; see also 

NAAG Comments, supra note 47, at 3, 6.
 87 See Wise Media TRO Memo, supra note 26, at 6.
 88 See Graphic, “Excerpts from an actual T-Mobile bill,” available at
 

http://www.ftc.gov/system/files/attachments/press-releases/ftc-alleges-t-mobile-crammed-bogus-charges­ customers-phone-bills/tmobile-samplebill.pdf.
 89 Supra Part III.A, at 10.
 90 Id.
 91 See FTC Roundtable transcript, L. Bryenton, Competition Bureau, Canada, at 49. See also Press Release, 

Competition Bureau (Canada), Competition Bureau Sues Bell, Rogers and Telus for Misleading Consumers: 

Bureau Seeks Customer Refunds and $31 Million in Penalties (Sept. 14, 2012), available at 

http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03498.html. 92 See PhonepayPlus, Comments for the FTC Mobile Cramming Roundtable (July 16, 2013), at 2, available at 

http://www.ftc.gov/os/comments/mobilecramming/564482-00017-86205.pdf.
 93 See Wayne Flower, False Text Message Racket Cashes in on Mobile Phone Charges, HERALD SUN, June 23, 

2013, available at http://www.heraldsun.com.au/news/law-order/false-text-message-racket-cashes-in-on-mobilephone-charges/story-fni0fee2-1226668456799; Katia Moskvitch, Hidden Mobile Charges that Could Be Buried in 

Your Bill, BBC NEWS, Sept. 6, 2012, available at http://www.bbc.co.uk/news/technology-19402398.
 

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94 

Mobile Cramming: An FTC Staff Report 

Address Online and Mobile Threats.”94 In it, they state that “‘cramming’ to Premium Rate ‘love advice’ 

or other text message services by Affiliates and/or Content providers has been commonplace.”95 

Australia has reported some success in combatting mobile cramming. In a case study published 

by the Australian Competition & Consumer Commission (“ACCC”), the ACCC found that previous 

controls – including industry self-regulation and some investigation into specific merchants – were not 

effective in reducing cramming. To address the problem, Australian authorities increased consumer 

education, brought enforcement actions, and worked closely with industry on adopting a set of 

regulations to protect consumers, which the ACCC noted was a “crucial component of providing a 

long-term solution to the problem.”96 Those regulations included, for example, requiring that carriers 

offer a block on Premium SMS services to consumers.97 After taking these steps, Australian authorities 

reported that the number of consumer complaints in Australia about cramming have dropped 

significantly.98 

IV. STRATEGIES TO REDUCE MOBILE 

CRAMMING 

Stakeholders in the mobile billing field have adopted a number of strategies to attempt to address 

unauthorized third-party charges. Below we discuss the current strategies being used to combat mobile 

cramming in four areas, and provide FTC staff’s view on further action to be taken to address the 

problem. Specifically, industry participants should give consumers the option of blocking third-party 

charges, implement measures to detect and prevent crammed charges from appearing on mobile phone 

bills, provide adequate disclosures of third-party charges, and establish clear and consistent dispute 

resolution policies for unauthorized charges. Staff’s recommendations apply regardless of what form of 

carrier billing is being used, whether it is DCB, Premium SMS, or a new form of carrier billing that 

emerges. 

LONDON ACTION PLAN & M3AAWG, BEST PRACTICES TO ADDRESS ONLINE AND MOBILE THREATS (Oct. 15, 

2012), available at 

http://www.maawg.org/sites/maawg/files/news/M3AAWG_LAP_Best_Practices_to_Address_Online_and_Mobil 

e_Threats_0.pdf. 95 Id. at 36.
 96 AUSTRALIAN COMPETITION & CONSUMER COMM’N, MOBILE PREMIUM SERVICES: MEETING THE CHALLENGES
 

(Sept. 18, 2012), at 1, 5-8, available at
 

http://www.accc.gov.au/system/files/Mobile%20Premium%20Services%20-%20Case%20Study.pdf. 97 Id. at 8.
 98 Id. at Figure 2.
 

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A.	 Allowing Consumers to Avoid Third-Party 

Charges to Mobile Accounts 

Consumers should be able to choose to avoid third-party charges to their mobile accounts 

altogether and, as explained below, some carriers appear to have taken steps to allow consumers to do 

so. FTC staff reiterates prior Commission recommendations in this area and recommends further 

industry best practices to empower consumers to make informed choices about third-party charges. 

1.	 Current Industry Practices 

According to CTIA, the four major carriers currently permit their customers to block third-party 

charges from being placed on their phone accounts.99 This option gives consumers who may not wish 

to use their phone accounts as a payment mechanism the ability to avoid third-party charges altogether, 

including unauthorized charges.100 Although some carriers provide information about these blocking 

options in their service agreements, at the point of sale, and on their consumer-facing websites, several 

stakeholders have suggested that customer service representatives are poorly informed about the option, 

and that mechanisms to add or remove a block have not always been prominently featured or clearly 

described in the service agreement or on carrier websites.101 Thus, some consumer groups have 

recommended prohibiting all third-party charges on wireless accounts by default, with an exemption for 

charitable giving.

102 

99 See FTC Roundtable transcript, M. Altschul, at 34-35, 171-72, 177; Verizon Wireless Comments, supra note 6, 

at 4; Sprint Nextel Comments, supra note 6, at 4.
 100 Some carriers also provide the ability to block charges from a specific third party’s services. See FTC
 

Roundtable transcript, M. Altschul, at 172, 177.
 101 See id., at 34-35; Verizon Wireless Comments, supra note 6, at 5; Sprint Nextel Comments, supra note 6, at 4; 

FTC Roundtable transcript, C. Witteman, at 92; California Public Utilities Commission Staff, Effectiveness of the
 

Cramming Rules in Decision 10-10-034 in Protecting California Consumers from Unauthorized Charges on Their
 

Phone Bills, and Related Developments in the Wireless Industry 16-17 (2014), available at
 

http://www.cpuc.ca.gov/PUC/hottopics/2Telco/01_June_2014_Cramming_Report.htm; see also Nat’l Consumers 

League, et al., Comments for the FTC Mobile Cramming Roundtable (June 7, 2013) at 8, available at
 

http://www.ftc.gov/sites/default/files/documents/public_comments/2013/06/564482-00013-86076.pdf [hereinafter
 

“Consumer Groups FTC Comment”]. Additionally, the State of California requires phone companies to disclose
 

to consumers that they can block all third-party charges on their mobile bills. See FTC Roundtable transcript, C. 

Witteman, at 90, 92; CPUC Rule, supra note 57, Attach. A at 4. From the record, it is not clear whether all
 

carriers currently have this option and make these disclosures.
 102 See Comments of Center for Media Justice, Consumer Action, Consumer Federation of America, Consumers
 

Union, National Consumer Law Center – on Behalf of Its Low-Income Clients, and National Consumer League, 

FCC CG Docket No. 11-116, at 18-19 (June 25, 2012), available at
 

http://apps.fcc.gov/ecfs/document/view?id=7021977710 [hereinafter “Consumer Groups FCC Comment”]. The
 

FCC is considering whether to modify its Truth-in-Billing rules to include a default block on all third-party 

charges. See FCC Refresh the Record, supra note 42. This would mean that consumers would have to 

affirmatively opt-in to third-party charges before such charges could be placed on their mobile phone bills. 

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Mobile Cramming: An FTC Staff Report 

During the mobile cramming roundtable, industry participants stated that some third-party 

charges originate on devices used by children.103 When children incur charges on a family plan, the 

primary account holder – typically a parent or other adult – receives a single monthly bill that includes 

charges for all the family members’ mobile devices that share the account. According to CTIA, mobile 

carriers offer account holders the opportunity to block all third-party charges on a family account or to 

block individual mobile devices from adding charges to the account.104 As discussed above in Part III, 

however, evidence shows that many consumers do not understand that mobile telephone bills may 

contain third-party charges. 

2. FTC Staff Recommendations 

As the Commission stated in comments to the FCC, all wireless providers should give consumers 

the option to block all third-party charges from their mobile phone accounts.105 Providing a blocking 

option would significantly benefit consumers who wish to avoid third-party charges while imposing 

minimal costs to consumers who wish to use their mobile accounts for third-party billing.106 At 

activation, consumers should be informed that third-party charges may be placed on their accounts, 

including using any phone numbers on a family plan, and they should be given the opportunity to block 

all charges at that time. This option should be clearly and prominently disclosed to consumers while the 

accounts are active, including on the carriers’ websites. According to CTIA, carriers currently offer the 

ability to block third-party charges on specific phone numbers on a family plan.107 Given the concerns 

raised about cramming on children’s numbers, carriers should clearly and prominently disclose these 

options as well. Notably, the FCC’s current Truth-in-Billing rules require landline carriers that offer 

blocking of third-party charges to clearly and conspicuously notify consumers of this option on each bill, 

their websites, and at the point of sale.108 

103 FTC Roundtable transcript, K. McCabe, at 61; A. Sege, at 130. 

104 See id., M. Altschul, at 171, 177.
 105 See FTC Reply Comment, supra note 4, at 12.
 106 In earlier comments to the FCC, the Commission supported a ban or default block on third-party billing for
 

landline billing, but stated that additional information was needed to determine whether a default block was
 

appropriate in the mobile context. See FTC Reply Comment, supra note 4, at 3, 11-12. The Commission noted 

that, in contrast to landline third-party billing, the mobile billing platform has been used for some legitimate
 

purposes – including charitable giving – and it is a potential platform for consumers to fund mobile payments for
 

desired services. Indeed, some consumer advocacy groups have agreed that there is legitimate commerce 

occurring through mobile billing. See Consumer Groups FTC Comment, supra note 101, at 9. See also FTC 

Roundtable transcript, D. Derakhshani, Consumers Union, at 174. Based on the current evidence regarding
 

authorized third-party carrier billing, as well as the potential costs and benefits of blocking third-party charges by
 

default, staff does not believe that a default block on mobile third-party billing is warranted at this time.
 107 See FTC Roundtable transcript, M. Altschul, at 171-72, 177.
 108 See Report and Order and Further Notice of Proposed Rulemaking, Docket No. 11-116, at 59 (Apr. 27, 2012), 

available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-12-42A1.pdf [hereinafter “FCC Report and
 

Order”]; 47 C.F.R. § 64.2401(f). 

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Additionally, carriers should consider offering consumers the ability to block or allow only 

specific providers, or to block commercial providers only. In the context of Premium SMS, some 

carriers provided the option to block individual short codes or subscriptions.109 Allowing more granular 

blocking would allow consumers to continue to authorize some third-party charges, including charitable 

or political donations, and may significantly benefit consumers who wish to use their mobile accounts 

for only certain kinds of third-party charges.110 

B.	 Strategies to Detect and Prevent Mobile 

Cramming 

Industry participants have adopted a range of strategies to attempt to detect and prevent mobile 

cramming. This section focuses on strategies involving two key issues: avoiding deceptive practices 

that lead to unauthorized charges on mobile accounts, and ensuring that consumers are providing 

express, informed consent to third-party charges on mobile accounts. As explained below, industry 

efforts have fallen short on both fronts. For example, carriers are not taking sufficient action against 

merchants with high refund rates. Further, the voluntary standards developed by industry have largely 

focused on text-message based Premium SMS services and have not specifically addressed other types 

of carrier billing including app- or mobile web-based billing using DCB arrangements. Accordingly, 

staff recommends best practices for improvement in this area. 

1.	 Avoiding Deceptive Practices That Lead to 

Unauthorized Mobile Charges 

a.	 Industry Practices 

Stakeholders in the mobile billing industry generally have relied on a set of voluntary guidelines 

to prevent deceptive marketing or advertising of mobile-billed goods or services. As discussed below, 

various industry participants monitor merchants’ marketing and advertising practices, and track 

merchants who have previously engaged in deceptive behavior, to varying degrees. Despite these 

industry best practices, however, there have been significant problems with enforcement and 

compliance. Moreover, it is unclear how these best practices – many of which were developed in 

connection with the text-message based Premium SMS model – are being applied in the context of DCB 

arrangements. 

109 See FTC Roundtable transcript, M. Altschul, at 171-72, 177. 

110 Carriers should ensure that their blocking services provide the protections they are purported to provide. The 

Senate Commerce Committee’s report on landline cramming found that consumers often incurred additional 

crammed charges on their landline telephone bills even after they requested the blocking of third-party charges on 

their landline telephone accounts. See S. COMMERCE COMM. CRAMMING REPORT, supra note 22, at 33-35, App. 

A. Mobile carriers should take steps to ensure that the blocking options they offer consumers are effective. 

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Voluntary guidelines. Until recently, the Mobile Marketing Association (“MMA”), a trade 

association that promotes mobile marketing, had taken the lead in publishing best practices for 

merchants who wish to place charges on mobile phone bills using Premium SMS.

111 In January 2013, 

CTIA began publishing a “Mobile Commerce Compliance Handbook,” which aims to distill the 

principles of the MMA best practices to a shorter set of guidelines. The CTIA guidebook which 

describes itself as a “unified standard of compliance for mobile carrier billing,” notes that its 

“requirements are based on the CTIA and participating carriers’ experience with standard rate and 

premium shortcode [Premium SMS] programs,” but that “the core rules are relevant to many types of 

mobile services.”112 It is not clear, however, how or to what extent the CTIA guidelines are used across 

all carrier billing arrangements. 

The MMA’s best practices include fairly detailed requirements for merchants to advertise their 

products and obtain consumers’ authorization for third-party charges billed to a mobile phone account. 

Some commenters have noted, however, that merchants technically could comply with guidelines while 

hiding key information, such as the fact that entry of a mobile phone number to access purportedly free 

content will automatically subject the consumer to a recurring $9.99 charge on a monthly phone bill.113 

Specifically, a set of related companies that the State of Texas sued for cramming technically complied 

with an MMA guideline that a price disclosure be 125 pixels away from a box to enter a cell phone 

number on a website, but blended the price disclosure with a background image to make it difficult to 

see, as illustrated on the following page:114 

111 The MMA periodically revised and published these as the “U.S. Consumer Best Practices for Messaging.” 

The most recent version (7.0) was published on October 16, 2012. See MOBILE MARKETING ASS’N, U.S.
 

CONSUMER BEST PRACTICES FOR MESSAGING VERSION 7.0 (Oct. 16, 2012), available at
 

http://www.mmaglobal.com/uploads/Consumer-Best-Practices.pdf. However, the MMA has stated that it will 

make no further revisions. See FTC Roundtable transcript, C. Frey, Mobile Marketing Association, at 76, 106-07. 

112 CTIA – THE WIRELESS ASSOCIATION, COMPLIANCE ASSURANCE SOLUTION: MOBILE COMMERCE
 

COMPLIANCE HANDBOOK (November 4, 2013), available at http://www.wmcglobal.com/assets/ctia-mobilecommerce-compliance-handbook-v-1-3.pdf [hereinafter “CTIA Handbook”]. 

113 See, e.g., FTC Roundtable transcript, P. Singer, at 108-09.
 114 See id., at 85-86; FTC Roundtable, PowerPoint Presentation re: State of Texas v. Eye Level Holdings, at 6,
 

PowerPoint slides available at http://www.ftc.gov/sites/default/files/documents/public_events/mobile-crammingroundtable/state-texas-v-eye-level-holdings-et-al.ppt [hereinafter “Eye Level Holdings Presentation”].
 

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(vertical arrow added.) The defendants sent confirmation texts to consumers that included large gaps of 

spacing in the text, so that the consumer was likely to see the PIN code for opt-in at the top or bottom of 

the message, but unlikely to see the price disclosure buried inconspicuously in the middle of the text 

message, which would be unlikely to be displayed when the message was opened, as shown below:115 

Bottom of 

Message 

(shown when 

opened) 

Top of Middle of Message Message 

Monitoring and Enforcement. Although the MMA first assembled the set of best practices that 

became known as “guidelines” for the industry, it has no role in monitoring industry participants to 

115 See FTC Roundtable transcript, P. Singer, at 86; Eye Level Holdings Presentation, supra note 114, at 8. 

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Mobile Cramming: An FTC Staff Report 

enforce the guidelines.116 Instead, industry participants choose whether to monitor and take action 

against merchants that violate the guidelines or otherwise engage in deceptive advertising or marketing 

practices.

117 

For example, carriers decide whether to allow merchants to bill on their networks, and prior to 

such approval, most carriers will review merchants’ marketing materials and opt-in processes to ensure 

that they comply with the industry guidelines.118 Each carrier then determines how much effort to 

invest in monitoring for compliance. At least some carriers have performed “in-market monitoring” – 

often by hiring third-party auditors – to check that the advertising and purchase flow continue to be 

compliant with industry or carrier-specific guidelines, at times looking beyond mere compliance with 

MMA and CTIA guidelines.119 Further, at least one aggregator has noted that it also has engaged in inmarket monitoring of campaigns.120 

To be reasonably effective, this kind of monitoring must take into account challenges from 

determined fraudsters. For example, one entity used sophisticated cloaking software that displayed nondeceptive webpages to auditing companies, but displayed a different webpage to consumers.121 Industry 

actors state that they have learned from experience in dealing with this kind of evasive activity.122 

Beyond reviewing and monitoring merchants’ marketing practices for deceptive behavior, CTIA and 

some carriers also have vetted merchants up front based on their past practices – in short, attempting to 

identify potential bad actors in advance and prevent them from billing on carrier networks. While this 

monitoring of relationships can identify individuals or entities associated with fraudulent behavior in 

some contexts, it does not necessarily look closely at whether the merchant has been involved with 

unauthorized billing on landline phone bills, which some commenters suggest would be appropriate 

given the prevalence of cramming on landline phone bills.123 

b. Staff Recommendations 

Under the FTC Act, merchants are in the first instance responsible for ensuring that their 

practices – including any advertising, marketing, and opt-in processes – are not deceptive, pursuant to 

the FTC Act. Further, information about price is important to consumers and should be disclosed clearly 

116 See FTC Roundtable transcript, C. Frey, at 76.
 117 See, e.g., Wise Media TRO Memo, supra note 26, at 12-13.
 118 See, e.g., Verizon Wireless Comments, supra note 6, at 2; Sprint Nextel Comments, supra note 6, at 5; FTC
 

Roundtable transcript, M. Altschul, at 25-26, 44-45; id., J. Bruner, at 81. 119 See id., J. Bruner, at 81, 96-97, 111; Verizon Wireless Comments, supra note 6, at 3-4; Sprint Nextel
 

Comments, supra note 6, at 5.
 120 See FTC Roundtable transcript, A. Sege, at 141.
 121 See id., P. Singer, at 87; id., J. Bruner, at 97; Order and Preliminary Injunction, Cellco P’ship v. Hope, No. 

CV11-0432-PHX-DGC (D. Ariz. May 11, 2011), at 4-6. 

122 See FTC Roundtable transcript, J. Bruner, at 97-98.
 123 See id., J. Bruner, at 104; id., J. Breyault, at 13; Consumer Groups FTC Comment, supra note 101, at 9-10.
 

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and conspicuously before charging a consumer’s telephone account for a good or service. As FTC staff 

stated in its 2013 report, .com Disclosures: How to Make Effective Disclosures in Digital Advertising, 

Disclosures that are an integral part of a claim or inseparable from it 

should not be communicated through a hyperlink. Instead, they should be 

placed on the same page and immediately next to the claim, and be 

sufficiently prominent so that the claim and the disclosure are read at the 

same time, without referring the consumer somewhere else to obtain this 

important information. This is particularly true for cost information or 

certain health and safety disclosures.124 

Thus, at a minimum, pricing information should be on the same page and immediately next to the 

purchase or buy button, entry of a PIN, or other invitation for a consumer to agree to a charge for a 

product or service, whether through a Premium SMS, DCB, or some other arrangement, and this price 

information should be prominent and in a font and size sufficient to read. Further, advertising and 

purchase confirmation screens must clearly disclose that the charge is being billed to a specific 

telephone account. Companies may consider, for example, whether identifying the last four digits of the 

consumer’s phone number on a purchase confirmation screen – similar to the way that the last four 

digits of a credit card number are commonly listed on confirmation screens – is feasible and useful as 

part of the key disclosure that the charge will be placed on a telephone account.125 While industry 

guidelines have in the past focused extensively on the text-message based Premium SMS opt-in process, 

the basic consumer protection principles outlined here should apply regardless of the type of carrier 

billing used, whether Premium SMS or DCB. 

Staff also recommends that carriers and billing intermediaries implement reasonable procedures 

to scrutinize risky or suspicious merchants and terminate or take other appropriate steps against 

companies engaging in unlawful practices. These kinds of measures are present in other payment 

industries. In the credit card and ACH industries, for example, banks that provide payment processing 

services are subject to KYC (“Know Your Customer”) procedures, which require banks to perform due 

diligence on their merchant-customers. Among other things, KYC principles require banks to gain 

familiarity with a merchant’s marketing practices to identify high-risk activities and ensure that it is not 

124 See FED. TRADE COMM’N STAFF, REVISED .COM DISCLOSURES: HOW TO MAKE EFFECTIVE DISCLOSURES IN 

DIGITAL ADVERTISING 10 (2013), available at http://www.ftc.gov/sites/default/files/attachments/pressreleases/ftc-staff-revises-online-advertising-disclosure-guidelines/130312dotcomdisclosures.pdf. 

125 Although the MMA and CTIA guidelines already purport to require pricing and payment information, the 

examples cited in the guidelines do not always make clear that it is the consumer’s phone bill that will be charged. 

See MOBILE MARKETING ASS’N, supra note 111, at 23 (Best Practice 2.3-5) (“All advertising must clearly 

disclose the subscription term, billing interval and information on how the charges will be applied (i.e., that the 

charges will be billed on the customer’s wireless phone bill or deducted from the customer’s prepaid balance).”); 

but compare CTIA Handbook, supra note 112, at 19-20, and MOBILE MARKETING ASS’N, supra note 111, at 38, 

40. Ensuring that the consumer understands the billing mechanism is consistent with rules adopted by the 

Commission in other contexts. See FTC Telemarketing Sales Rule, 16 C.F.R. § 310.4(a)(7)(i)-(ii). 

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facilitating fraudulent or other illegal activity.126 Further, the operating rules established by the credit 

card associations and NACHA – The Electronic Payments Association (for ACH transactions) 

encourage banks to monitor merchant transaction activity to identify merchants engaged in fraud or 

other illegal conduct, and to cut off their access to the payment systems if appropriate.127 While the 

specific procedures may vary by industry, this kind of monitoring and termination of fraudulent 

merchants has been beneficial in protecting consumers and maintaining the integrity of the billing 

platform. 

Similarly, staff recommends that if a carrier or billing intermediary discovers that a merchant has 

run a campaign containing deceptive advertising, or discovers the merchant engaged in unauthorized 

billing on landline phones, the carrier should closely monitor other campaigns run by that third party or 

its affiliates to ensure compliance. Carriers can use monitoring techniques to address known tactics by 

fraudsters to evade detection, in order to determine consumers’ actual experience with third-party 

merchants’ advertisements and sign-up processes, such as viewing advertisements on devices not 

registered to the carrier. Industry participants also can adopt a policy of terminating serious and repeat 

offenders. While there are costs to effective monitoring, there are also benefits both to the industry 

itself, in the form of lower costs to process refund requests and handle customer complaints, and to 

consumers, who avoid being crammed with unauthorized charges. 

2. Obtaining Consumers’ Express, Informed Consent 

a. Current Industry Practices 

As discussed above, mobile industry participants created the MMA best practices and the CTIA 

guidelines in an effort to ensure that consumers authorize the third-party charges that mobile carriers 

include on mobile telephone accounts. In the context of Premium SMS, the core of those self-regulatory 

initiatives is a requirement that third-party merchants employ a “double opt-in” process that requires 

consumers to take two separate steps to authorize a third-party charge, one of which is intended to 

confirm that the consumer is in physical possession of a phone tied to the account that will be 

126 See, e.g., Fed. Deposit Ins. Corp., FDIC Supervisory Approach to Payment Processing Relationships With 

Merchant Customers That Engage in Higher-Risk Activities, FIL-43-2013 (Sept. 27, 2013), available at 

http://www.fdic.gov/news/news/financial/2013/fil13043.pdf; Fed. Deposit Ins. Corp., Payment Processor 

Relationships Revised Guidance, FIL-3-2012 (January 31, 2012), available at 

http://www.fdic.gov/news/news/financial/2012/fil12003.pdf; Office of the Comptroller of the Currency, OCC 

Bulletin 2013-29 (Oct. 30, 2013), available at http://occ.gov/news-issuances/bulletins/2013/bulletin-2013­

29.html; Office of the Comptroller of the Currency, OCC Bulletin 2006-39 (Sept. 1, 2006), available at 

http://www.occ.gov/news-issuances/bulletins/2006/bulletin-2006-39.html. Banks also require their payment 

processor customers to comply with KYC procedures for merchant-customers. 

127 See, e.g., VISA, ACQUIRER BEST PRACTICES CONTINUITY MERCHANTS (Aug. 26, 2010), available at 

https://usa.visa.com/download/merchants/bulletin_acquirer_continuity_best_practices.pdf; NACHA Operating 

Rules, supra note 61, at § 2.2.3; see also VISA, VISA E-COMMERCE MERCHANTS’ GUIDE TO RISK MANAGEMENT 

24-25 (2008), available at https://usa.visa.com/download/merchants/visa-risk-management-guide-ecommerce.pdf. 

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charged.

128 As noted above, it is not clear whether industry participants in DCB arrangements routinely 

follow the same sort of double opt-in process used for Premium SMS transactions or use other methods 

to obtain consumers’ authorization. 

Individual carriers have also used refund rates to identify third-party merchants who may not be 

obtaining consumer consent to charges, and individual carriers have the discretion to penalize or cut off 

merchants with high refund rates,129 with one carrier, for example, terminating Premium SMS 

merchants with an 8% or higher refund rate.130 Based on the record of consumer complaints, refunds, 

and law enforcement actions described above, however, it does not appear that the double opt-in 

requirement or carriers’ current practices involving monitoring refund rates and terminating problematic 

merchants have prevented unauthorized charges on consumers’ mobile telephone accounts. 

Commenters have noted that crammers can easily obtain consumers’ phone numbers and find ways to 

bill consumers even without completing either step of the purported double opt-in.131 Consumers have 

repeatedly complained that charges appear on accounts without any affirmative action by the 

132 

consumer. 

Given the issues with spurious consumer authorizations, one question raised by various 

stakeholders is which entity in the carrier billing process should host the records and control the process 

of the consumer authorization. Although merchants historically have controlled the opt-in process for 

Premium SMS,133 there appears to be a trend toward greater carrier or aggregator control of the opt-in 

process. 

134 With respect to noncommercial third-party charges, one representative of the Mobile Giving 

128 See FTC Roundtable transcript, A. Sege, at 128; id., J. Bruner, at 113. Common forms of double opt-in 

include: 

1.	 Mobile phone opt-in – a consumer sends a text message with a keyword to a short code, receives a 

confirmation text, and then sends a second text message to confirm the transaction; 

2.	 Web opt-in – a consumer first enters his or her number on a website, then receives a text with a PIN, 

which the consumers enters back into the website; 

3.	 WAP (wireless access protocol) – a consumer responds to an offer on his or her phone (displayed 

through the mobile web), and clicks on a confirmation button on the phone two separate times; and 

4.	 IVR (interactive voice response) – a consumer opts-in over the phone through a toll-free number and 

confirms the transaction twice. See FTC Roundtable transcript, J. Sizer, Aegis Mobile, at 122-23. 

129 See Wise Media TRO Memo, supra note 26, at 12-13; FTC Roundtable transcript, J. Bruner, at 82; id., M. 

Altschul, at 146. 

130 See Wise Media Declaration, supra note 20, at FTC 1 - 000012-13, ¶ 27. 

131 See FTC Roundtable transcript, M. Tiano, S. Comm. on Commerce, Science, and Transp., at 164; NAAG 

Comments, supra note 47, at 11-12; Consumer Groups FCC Comment, supra note 102, at 10-15. 

132 See supra Part III.A, at 11, 14. 

133 See FTC Roundtable transcript, M. Altschul, at 39, 62; id., J. Manis, at 27. 

134 See id., M. Altschul, at 39, 62; Verizon Wireless Comments, supra note 6, at 3. At least one major aggregator 

indicated that it will require all merchants to use the aggregator to host the opt-in records. See FTC Roundtable 

transcript, A. Sege, at 167-68. The State of Texas, however, recently sued that aggregator for allegedly 

“orchestrating and facilitating” a cramming scheme. See Mobile Messenger Complaint, supra note 54, at 5. 

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Foundation, a billing intermediary, noted that it manages the text-based opt-ins for participating 

charities.135 And at least some DCB intermediaries also appear to manage the consumer opt-in, 

including by sending the consumer a PIN to confirm authorization.136 Centralization allows for greater 

control and transparency as to individual merchants’ authorization and billing activities.137 One direct 

carrier billing intermediary has stated that managing the two-step confirmation process is one of the 

factors that has led to its low refund rate, reportedly less than 1% on some carriers.

138 

As mobile cramming issues have become more apparent, state regulators and other stakeholders 

have called for greater centralization of opt-in records as one way to address cramming.139 The 

Attorneys General from thirty-six states, the District of Columbia, Guam, Puerto Rico, and the Virgin 

Islands have criticized current industry practices for placing too much of the opt-in responsibility in the 

hands of third-party merchants and billing intermediaries. In the view of those Attorneys General, those 

parties have significant incentive to bill for services whether or not consumers have authorized them.140 

An order by the CPUC in 2010 sets forth the general principle that “the billing telephone 

corporation [is the entity that] bears ultimate responsibility for all items presented in a subscriber’s 

bill.”141 In 2013, the National Association of State Utility Consumer Advocates (NASUCA) 

recommended the passage of state legislation to address mobile cramming.142 The proposed legislation 

would hold telephone companies, aggregators, and third-party merchants all responsible for 

unauthorized charges, providing a defense only if “the circumstances giving rise to the unauthorized 

charge were beyond the control of, or could not reasonably have been prevented by, the company.”143 

b. Staff Recommendations 

It is critical that consumers provide their express, informed consent to charges before they are 

billed to a mobile account, and that reliable records of such authorizations are maintained. Industry 

practices have not sufficiently prevented unauthorized charges. In Premium SMS, mobile carriers 

typically have relied on the merchant’s representation – passed on by the billing intermediary – that a 

135 See FTC Roundtable transcript, J. Manis, at 27.
 136 See id., M. Niejadlik, at 136; id., J. Greenwell, at 65.
 137 See FTC Roundtable transcript, J. Manis, at 26-27.
 138 See id., J. Greenwell, at 65.
 139 See FTC Roundtable transcript, C. Witteman, at 114-15. 

140 See NAAG Comments, supra note 47, at 12.
 141 CPUC Rule, supra note 57, Attach. A at 4; see also FTC Roundtable transcript, C. Witteman, at 90.
 142 Nat’l Ass’n of State Util. Consumer Advocates, Urging State Legislatures to Prohibit the “Cramming” of
 

Unauthorized Charges Onto Consumer Telephone Bills (June 11, 2013), at 2, available at http://nasuca.org/2013­

01-urging-state-legislatures-to-prohibit-the-cramming-of-unauthorized-charges-onto-consumer-telephone-billsand-proposing-a-statute-to-solve-the-problem/.
 143 Id. at 7. 

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consumer opted-in to a charge, but, as the law enforcement actions and consumer complaints described 

above demonstrate, those representations often are unreliable. 

Given the unreliability of many merchants’ claims that they have obtained consumer consent, 

more centralized control of the consumer opt-in process and authorization records is needed. As noted 

above, the industry appears to have already implemented changes in this direction. As the technology 

used for consent management shifts from Premium SMS arrangements to DCB arrangements, carriers 

and intermediaries should maintain sufficient control over the consent process to address the problem of 

unauthorized charges, for example, by maintaining reliable and accessible records of consumer 

authorizations. Centralization may shift some compliance costs from the merchants to carriers and 

intermediaries, but should benefit consumers and industry participants by making it more difficult for 

unscrupulous merchants to place unauthorized charges and by streamlining dispute resolution when a 

consumer claims a charge was unauthorized. 

Further, individual carriers’ policies on taking action against merchants with high refund rates 

have not been sufficient to combat mobile cramming – for example, as noted above, at least one carrier 

continued billing consumers for Wise Media charges even after the company’s monthly refund rate 

exceeded 40% on some campaigns.144 Mobile carriers should implement policies, or strengthen existing 

polices, to investigate and take appropriate action when consumer refund requests and complaints 

indicate that a merchant may be cramming charges without consumers’ consent. As discussed above, 

other industries have examined refund rates to determine what rates should trigger additional scrutiny 

and possible termination of a merchant.145 Monitoring consumer refund requests, and taking 

appropriate action when there are indications of unauthorized charges, can be a highly effective means 

of detecting and stopping cramming. It is particularly important to monitor refund requests in carrier 

billing, where merchants have been able to cram charges without using deceptive advertisements or 

other techniques to contact consumers that can be independently identified. 

C.	 Adequate Disclosures of Third-Party
 

Charges
 

Another important step in preventing cramming is ensuring that consumers are adequately 

informed of all third-party charges on their accounts. Many consumers currently overlook third-party 

charges on their mobile accounts. Staff provides recommendations in this section for making 

disclosures of those charges clearer and more prominent. 

144 See Wise Media Declaration, supra note 20, at Ex. FTC 21. 

145 See supra Part III.B.1, at 16. 

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Mobile Cramming: An FTC Staff Report 

1. Current Industry Practices 

As discussed above in Part III, many consumers have found it difficult to detect unauthorized 

charges on their mobile phone bills because of the description and location of third-party charges on the 

bill.146 For example, the State of Texas alleged in one case that crammed charges were sometimes listed 

as “Standard Rate Plan” on the consumers’ bills.147 In the FTC’s case against Wise Media, the charges 

typically appeared buried among other charges; as noted above, one consumer reported that a Wise 

Media charge was listed on page 18 of her phone bill. Wise Media charges also appeared in a manner 

that made it difficult, if not impossible, to identify that the charges were for services provided by a 

company other than the carrier.

148 And in its complaint against T-Mobile, the Commission has alleged 

that consumers who reviewed an online summary of their bills would see third-party charges lumped 

together in a line item labeled “Use Charges” that could include charges for both T-Mobile’s own 

services, such as for text messages, and for third-party charges.149 Roundtable panelists noted that many 

consumers are simply unaware that third parties can even place charges on mobile phone bills, and thus 

are unlikely to review complicated and lengthy phone bills to find such charges and make sure they are 

authorized.150 

The FCC’s current Truth-in-Billing rules require mobile carriers’ bills to clearly identify the 

service provider and provide a full and non-misleading description of each charge.151 In the landline 

space, there are additional FCC requirements that carriers place all third-party charges for nontelecommunications services in a distinct bill section separate from all carrier charges, and that the bill 

must provide separate totals for carrier and non-carrier charges.152 Although these latter requirements 

currently apply to landline bills only, the FCC recently reopened its request for comment on whether to 

expand them to mobile phone bills.153 

2. Staff Recommendations 

To help consumers understand what third-party services they are paying for with their mobile 

phone accounts – and determine whether there are any unauthorized charges on their accounts – carriers 

should clearly and conspicuously disclose all charges for third-party services in a non-deceptive manner. 

146 See supra Part III, at 10, 20.
 147 See FTC Roundtable transcript, P. Singer, at 86-87.
 148 See, e.g., Wise Media Declaration, supra note 20, at Exs. FTC 66, FTC 71, FTC 72, FTC 73; Wise Media TRO
 

Memo, supra note 26, at 6 n.2.
 149 T-Mobile Complaint, supra note 20, at ¶ 13. 

150 See FTC Roundtable transcript, P. Singer, at 118; id., M. Niejadlik, at 155-56; id., K. McCabe, at 12, 28.
 151 See FTC Roundtable transcript, L. Follansbee, Fed. Commc’ns Comm’n, at 133; FCC Report and Order, supra
 

note 108, at 6; 47 C.F.R. § 64.2401(b).
 152 See 47 C.F.R. § 64.2401(a); FCC Report and Order, supra note 108, at 20. 

153 See FTC Roundtable transcript, L. Follansbee, at 133-34; FCC Report and Order, supra note 108, at 20-21, 53; 

FCC Refresh the Record, supra note 42, at 1. 

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In particular, the name of the third-party service and any associated bill heading should relate to the 

product offered and not suggest an affiliation with the carrier’s service. Billing intermediaries and 

merchants must provide accurate information to carriers for these disclosures. 

FTC staff further recommends that carriers, as well as the FCC, consider ways to make thirdparty charges more conspicuous. For example consistent with the FCC’s rules for landline billing, thirdparty charges could be placed in a separate part of consumers’ mobile phone bills and separate subtotals 

for carrier and third-party charges be provided wherever total charges are disclosed – typically on the 

first page of the bill. As discussed above, many consumers are unaware that third-party charges can be 

placed on their mobile phone bills, and consumers have expressed frustration that the charges are often 

buried in lengthy phone bills. The benefits of enhanced disclosures, which will help consumers identify 

unauthorized charges, would likely outweigh the costs of any necessary changes to the format of the 

mobile phone bill. 

Staff notes that these recommendations may be less beneficial for consumers who auto-pay their 

bills and may be especially unlikely to review the charges. Carriers should thus consider whether these 

consumers would benefit from receiving a separate notification of third-party charges. Consumers with 

prepaid phone plans who do not typically receive phone bills should also receive such a notification 

from the carrier. 

D. Consumer Dispute Protections and Refunds 

Stakeholders have expressed widely divergent views regarding consumers’ ability to obtain 

refunds for unauthorized third-party charges under current industry practices. As noted below, industry 

representatives state that the carriers have generous refund policies that enable consumers to obtain 

refunds promptly from their carriers when they believe they have been crammed. By contrast, consumer 

advocates and regulators state that it is difficult for consumers to obtain refunds, and they also note that 

refunds often are limited to one or two months’ worth of charges even when consumers discover they 

incurred crammed charges for a longer time period. FTC staff reiterates the Commission’s prior 

recommendation that mobile carriers should provide a clear and consistent process for customers to 

dispute suspicious charges on their mobile accounts and obtain reimbursement.154 Staff provides further 

recommendations for industry in implementing that process. 

1. Current Industry Practices 

Two major carriers submitted comments stating that they encourage consumers to contact them 

to discuss third-party charges or billing issues.155 Further, according to CTIA, mobile carriers have 

generous refund policies with respect to third-party charges on consumer’s telephone bills.156 In 

particular, CTIA touts carriers’ “one-and-done” policies, which empower the carriers’ customer service 

representatives to address a consumer’s complaint about unauthorized third-party charges during the 

154 FTC Reply Comment, supra note 4, at 12. 

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Mobile Cramming: An FTC Staff Report 

consumer’s initial call to dispute the charge.157 Additionally, in the landline context, the United States 

Telecom Association has stated that non-payment of third-party charges will not result in phone service 

being suspended or terminated.158 Carriers, however, have not stated that this protection applies to the 

mobile context. 

Consumers’ experiences attempting to get refunds vary and are not consistent with a “one-anddone” policy.159 In lawsuits that alleged cramming, many consumers reported that they found it 

difficult, if not impossible, to obtain refunds from their carriers when they disputed third-party 

charges.160 Some consumers reported that they were only able to obtain partial refunds rather than full 

refunds for the entire period during which they incurred unauthorized charges.161 Law enforcement 

officials have also noted that consumers have inconsistent experiences with obtaining refunds when they 

discover that they have been crammed.162 Consumers’ experiences include carriers providing partial 

refunds, carriers providing no refunds and instead referring consumers to the third-party merchant, and 

third-party merchants providing partial or no refunds.163 In addition to calling for clear and consistent 

dispute policies, consumer advocates also recommend that consumers be able to withhold payment on 

disputed charges with the knowledge that their phone service will not be cut off while the investigation 

is pending.164 Although the landline third-party billing industry states that it has taken this step, one 

roundtable participant raised concerns that consumers are unaware that they can withhold payment 

pending a dispute of a third-party charge on a mobile account.165 

It is also not clear whether, and to what extent, carriers proactively notify or provide refunds to 

consumers who have been billed by merchants that the carrier has terminated for engaging in cramming. 

According to CTIA, “in appropriate cases,” at least some carriers will proactively provide retroactive 

refunds without waiting for consumers to complain.166 The carriers have not, however, provided any 

data regarding the frequency with which they have issued retroactive refunds to all consumers who 

incurred charges from a third party that the carriers terminated for cramming. 

155 See Sprint Nextel Comments, supra note 6, at 6; Verizon Wireless Comments, supra note 6, at 5.
 156 See FTC Roundtable transcript, M. Altschul, at 60.
 157 Id., M. Altschul, at 185-86.
 158 FCC Workshop, Bill Shock and Cramming (Apr. 17, 2013), G. Reynolds, United States Telecom Association, 

at 99:15, recording available at http://www.fcc.gov/events/workshop-bill-shock-and-cramming. 159 See FTC Roundtable transcript., M. Tiano, at 186-87 (discussing wireline cramming); id., J. Breyault, at 55; 

id., P. Singer 101-02, 116-17; Consumer Groups FTC Comment, supra note 101, at 7. 

160 See FTC Roundtable transcript, P. Singer, at 116-117; Wise Media TRO Memo, supra note 26, at 11-12. 

161 See FTC Roundtable, K. McCabe, at 61; KOLODINSKY, supra note 66, App. C at 6-8. 

162 See NAAG Comments, supra note 47, at 3-4. 

163 See id. 164 FTC Roundtable transcript, J. Chilsen, at 121; Consumer Groups FCC Comment, supra note 102, at 21. 

165 FTC Roundtable transcript, J. Chilsen, at 121. 

166 Id., M. Altschul, at 152. 

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2. Staff Recommendations
 

As the Commission has previously emphasized, carriers should implement a clear and consistent 

process for consumers to dispute suspicious charges on their mobile accounts and obtain refunds for 

unauthorized charges.167 In the FTC Mobile Payments Report, FTC staff noted that no federal statutory 

protections have been applied to consumer disputes about unauthorized charges placed on mobile carrier 

accounts, in contrast to the implementation of statutory dispute rights for unauthorized credit card and 

debit card charges.168 For example, in the credit card industry, consumers have dispute resolution rights 

and liability limits for unauthorized charges under Regulation Z, including a right to withhold payment 

while the dispute is pending.169 For debit card users, Regulation E provides protection for consumers, 

including a requirement that funds debited in an unauthorized transaction be returned to a consumer’s 

account within ten days, pending further investigation.170 

Because consumers currently do not have access to a clear and consistent process for disputing 

unauthorized charges to their mobile accounts, staff recommends that carriers implement such processes 

and ensure that their customer service representatives abide by them. For example, as noted above, in 

the landline context, industry members have stated that consumers can withhold payment on disputed 

charges during the dispute period without a cut-off in phone service or accrual of interest. Consumers 

appear to be unaware of an analogous right in the mobile billing context, however. Staff recommends 

that this protection be extended to the mobile billing context, and that consumers be informed of it. 

Further, given the extensive evidence that consumers are unaware of third-party charges on their phone 

accounts, FTC staff recommends that when consumers seek refunds for recurring unauthorized charges 

and a carrier concludes those charges were crammed, consumers could be granted refunds for the same 

recurring charge in previous months to the extent it is practicable to identify those prior charges. 

Finally, when a third party’s billing activities are terminated for unauthorized charges, staff 

recommends that the carrier notify consumers who incurred charges from the third party to allow them 

to request a refund.171 Moreover, given the major carriers’ recent decision to discontinue Premium 

167 FTC Reply Comment, supra note 4, at 12.
 168 FTC MOBILE PAYMENTS REPORT, supra note 6, at 5-8.
 169 See 12 C.F.R. §§ 1026.12, 1026.13.
 170 See 12 C.F.R. §§ 1005.6, 1005.11.
 171 The Senate Commerce Committee’s report on landline cramming discusses a customer survey that a landline
 

carrier conducted via email when it suspected that a third party had engaged in landline cramming. None of the
 

consumers who responded to the survey reported that they had authorized the third-party charge at issue. None of
 

the first twelve respondents to the survey had complained to the landline carrier about the unauthorized thirdparty charge before the landline carrier conducted the survey, and it is not known whether any of the other survey
 

respondents had complained to the carrier before receiving the survey either. S. COMMERCE COMM. CRAMMING 

REPORT, supra note 22, at 37.
 

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SMS services in response to documented allegations of fraud,172 carriers should consider proactively 

notifying consumers who have paid a Premium SMS charge for merchants that the carriers have reason 

to believe are crammers and informing those consumers of the steps they should take to seek a refund if 

they believe the charge was unauthorized. In these circumstances involving clear fraud, consumers 

should have an opportunity to be made whole. 

CONCLUSION 

As consumers increasingly turn to their mobile phones as a payment mechanism, it is critical that 

carriers and other industry participants proactively address mobile cramming. Although the industry has 

taken some steps to combat unauthorized third-party charges on mobile phone accounts, more needs to 

be done to address this ongoing problem. Companies must keep basic consumer protection principles in 

mind as they develop and promote carrier billing options, particularly as the industry continues its 

transition from Premium SMS to other billing platforms like DCB. Mobile billing offers a promising 

option for consumers, but industry participants must recognize that innovation goes hand-in-hand with 

longstanding consumer protection principles. The more companies keep these principles in mind, the 

more consumers will trust and adopt these innovative payment methods. 

The FTC will continue to monitor and, where appropriate, investigate industry participants – 

carriers, billing intermediaries, and merchants – involved in third-party mobile billing and bring further 

enforcement actions. Further, the FTC will continue to monitor the issue of cramming on mobile phone 

accounts and evaluate whether other potential solutions – including legislative measures and additional 

regulatory changes – are necessary to ensure consumers are protected from unwanted and unauthorized 

charges. 

172 See T-Mobile Will No Longer Allow Third Parties to Bill Customers for Premium SMS Services, T-MOBILE, 

http://newsroom.t-mobile.com/news/t-mobile-announces-new-program-related-to-premium-sms-charges.htm (last 

visited July 23, 2014) (“Despite protections and processes put in place by T-Mobile and the industry, not all 

Premium SMS vendors have acted responsibly.”); Pamela Prah, ‘Cramming’ phone scams targeted by state 

attorneys general, USA TODAY, Dec. 19, 2013, available at 

http://www.usatoday.com/story/news/nation/2013/12/19/stateline-cellphone-cramming/4129561/ (Verizon 

Wireless statement that it was in the process of winding down its premium messaging business, in part, because of 

“recent allegations that third parties have engaged in improper conduct in providing premium messaging services 

to our customers.”). 

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July 2014 


Federal Trade Commission 


FTC.gov