FTC Seeks Return of $52 Million Worth of Bogus Phone Bill Cramming Charges; Agency Charges Nation's Largest Third-Party Billing Company with Contempt

The Federal Trade Commission is seeking a civil contempt ruling against the nation's largest third-party billing company, alleging that it placed more than $70 million in bogus "cramming" charges on consumers' phone bills in violation of a previous court order. The FTC is asking a federal court to make the company pay more than $52.6 million, the total amount that the company billed consumers and failed to refund.

The FTC alleged that Billing Services Group (BSG) placed charges on nearly 1.2 million telephone lines on behalf of a serial phone crammer. The charges were supposedly for "enhanced services," such as voicemail and streaming video, that consumers never authorized or even knew about. "BSG made it possible for con artists to steal people's hard-earned money by placing charges on phone bills for services they never ordered or used," said David Vladeck, Director of the FTC's Bureau of Consumer Protection. "Under previous federal court orders, BSG cannot profit from the fraud of others and then deny responsibility for the harm they made possible."

Billing aggregators act as intermediaries between third-party vendors and the local phone companies by contracting to have the local telephone companies collect charges for the vendors' services from consumers. "Cramming" is the placement of unauthorized charges on phone bills.

In its contempt motion, the FTC said BSG failed to investigate either the highly deceptive marketing for the services or whether consumers even used them. BSG kept billing for these services despite voluminous complaints from consumers and even after major telephone companies refused to do so, the FTC's motion stated.

The FTC alleged that by putting the bogus charges on consumers' phone bills, BSG violated the terms of a 1999 settlement with the agency, which prohibits unauthorized billing, misrepresentations to consumers, and billing for vendors who fail to clearly disclose the terms of their services. The contempt action is the FTC's fourth action addressing extensive cramming by BSG entities. In addition to the 1999 order, the FTC previously obtained two other cramming orders against BSG companies: Nationwide Connections Inc., which addressed $34.5 million in charges for collect calls that never occurred, and Enhanced Services Billing Inc., which addressed crammed charges for enhanced services.

According to the FTC's motion, from 2006 through 2010, BSG illegally billed consumers for nine crammed "enhanced services," including three voicemail services, one streaming video service, two identity theft protection services, two directory assistance services, and one job skills training service. In one example cited in the FTC's motion, a BSG subsidiary charged consumers for voicemail services without their consent, as demonstrated by "voluminous consumer complaints, astronomical refund rates," and the fact that almost none of the consumers who were billed ever used the services. In 2007, as noted in the motion, Verizon notified BSG that it was terminating the ability of one of the voicemail services to bill Verizon customers, stating, "as they have not and will not bring cramming complaint level" down. Yet BSG continued billing consumers for the voicemail services through other local telephone service providers and subsequently billed other services for the voicemail services' principals.

The FTC's contempt motion noted that BSG billed tens of thousands of consumers for voicemail boxes each month from July 2009 through March 2010, but consumers used only 209 mailboxes during that time. The motion also stated that BSG billed over 250,000 consumers for a streaming video service, but only 23 total movies were streamed, some of them by the crammers' employees. Despite overwhelming evidence of cramming, BSG billed consumers more than $30 million for the voicemail services and more than $12 million for the video service.

The FTC would like to thank the Federal Bureau of Investigation and the United States Attorney's Office for the Southern District of Indiana for their assistance. The civil contempt action was filed in the U.S. District Court for the Western District of Texas, San Antonio Division.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC's online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC's website provides free information on a variety of consumer topics. Like the FTC on Facebook and follow us on Twitter.

(FTC File No. X980069)