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Telecom firms can't say how 'crammed' charges were billed to unused phone

Despite years of investigations, congressional hearings and promises from the telecommunications industry, phone bill “cramming” --  the addition of usually small third-party charges without a subscriber's consent -- remains a major consumer headache.

Brett Strauss can attest to that. He purchased an AT&T cellphone for his business that wasn't used for months, but somehow accrued more than $300 in charges for unwanted third-party services that were crammed onto his bill during that period. 

Both AT&T and the third-party firm behind the charges, Los Angeles-based GoLiveMobile, said that they require a strict sign-up process they call "double opt-in," meaning consumers must twice confirm they authorize a charge to their service.

But Mark Siegel, spokesman for AT&T, confirmed Strauss’ phone had been dormant when the charges appeared. How those charges ended up on his bill remains a mystery.

Strauss said he has about 12 phones for his employees, and this one wasn’t needed. "The phone has sat in a drawer all this time having never been used," he said. "This makes the cramming issue all the more interesting. How do you cram an unused phone?"

To most consumers, cramming is a mystery. The root of the problems dates back to the original breakup of the AT&T telephone monopoly in the 1980s, which required the telephone giant to allow third-parties to use their equipment and offer alternative services, such as long distance.  Rogue operators quickly learned they could trick AT&T and other phone providers into signing up consumers for services they didn’t want, and “cram” these onto their bills. Cramming has since been a thorn in the side of consumers, first targeting those with land-lines, when tack-on services like unnecessary voice mail were often snuck onto bills. It has seen resurgence in the age of cellphones and smartphones, as crammed charges are easily intermingled with legitimate third-party fees, creating even more consumer confusion.

The charges may be small -- usually $9.99 or less at a time -- but they add up to big money. A report issued by Sen. Jay Rockefeller, D-W.Va.,  in 2011 found that consumers lose $2 billion annually to unwanted third-party phone charges, and big telecom firms earned $650 million from 2006-2011 as their cut from companies that crammed consumers. 

Last year, the Federal Communications Commission adopted new rules aimed at curbing cramming, but the agency stopped short of banning the practice.

Arguments about cramming often devolve into a he-said, she-said affair, with telecom firms saying consumers agreed to the charge and consumers denying they did so. 

That's why the Strauss case is interesting.  AT&T doesn't disagree with his contention that the phone was unused, yet it still maintains that it requires third-party firms to utilize a double-opt in process. How could that be?

"We do require the double opt-in process I described to you, but that's not to say it's impossible for a customer to get, say, a text message from a third party that does not follow this process," said Siegel, the AT&T spokesman.

The double-opt in process, as Siegel described it, involves a consumer texting a service to sign up, then receiving an initial acknowledgement text with a PIN code that must be sent back to the firm before billing is initiated.

"It's not possible for (third-party firms) to magically appear and to start to bill you," he said. "Someone had to order (services) in some way, even if was just by accident."

He added that AT&T is very strict about which third-party firms it allows into its system.

"The only way we will agree to have third-party billing with a company is if they agree to use this double opt-in process," he said. "Ultimately, since this appears on our bill, we need to deal with it."

For its part, GoLiveMobile said in an email that it would not comment on Strauss' situation, but that it follows strict sign-up procedures.

“While we do not comment on individual customer cases, GoLive! has procedures and policies that exceed industry best practices, including in keeping with guidelines of the Mobile Marketing Association, its cell carrier partners, and various third-party auditing firms focused on consumer protection," said the statement, which the author asked be attributed to a company spokesperson. "Any and all customers must go through a double opt-in feature, where customers must be in physical possession of their mobile device and accept the industry-approved terms and conditions of the program, including all relevant charges and fees twice before any program is activated."

Strauss said none of that happened. He hadn't heard of GoLiveMobile until he found a series of charges on his cellphone bill for a service named MoZoot, which is provided by GoLiveMobile. MoZoot lets users ask questions and get answers via text message. 

"I never once contacted these folks as Google does just fine answering my questions," Strauss said.

There are numerous other complaints about MoZoot published by consumers online.

The FCC said in 2011 that as many as 20 million U.S. consumers are hit annually by cramming. Crammers rely on consumers not scanning their bills diligently and not noticing the small charges they insert for many months – if at all. If they do notice them, they are often stuck in a Catch-22 -- the telecom carrier will refer them to the third-party firm to request a credit. The third-party firm will often refuse to give credit for more than 30 or 60 days.

To its credit, AT&T refunded all Strauss' money -- a total of $318 -- directly after he called to complain. 

In its statement to NBC News, GoLiveMobile said it has a liberal refund policy.

"While the industry standard is to grant a refund for a maximum of 60-90 days, we go above and beyond this policy to grant refunds for the complete lifetime of any sign-up," it said. 

Strauss was also given the chance to lock his cellphone account against any future third-party charges. He wondered why such a block wasn't enabled in the first place.

"Why does AT&T only install the security (block) after you complain, even though they know clearly that this is a big problem?" he said.

The new FCC rules require that firms give consumers the opportunity to block their phones against third-party charges, but they do not require firms to set the block by default, and most don't.

"There is a very high demand from our customers for third-party billing,” said AT&T’s Siegel. “ That's not a surprise given the growth in apps, music downloads, and so on. This is something that our customers really want, because it's convenient."

AT&T also sends regular, helpful text messages to consumers warning them that they are being billed for a third-party service and including a link to challenge the bill if necessary at http://att.com/mobilepurchases .  In fact, one such warning led Strauss to check his bill more closely and discover the GoLiveMobile charges.

"That's the larger issue," Siegel said. "You need to check your bills carefully and if you see (an unwanted) charge get in touch with us right away."

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