FTC Files Fourth Action To Combat Telephone Bill Cramming

A fourth action against yet another telephone bill "crammer" was announced today by the Federal Trade Commission. Cramming is the practice of causing unauthorized charges to appear on consumers' phone bills. In a complaint filed in U.S. District Court, the FTC alleges that Crown Communications, its affiliates and three corporate officers fraudulently billed consumers across the country for telephone entertainment services ("audiotext services") they had not ordered. According to the complaint, the defendants misled consumers by telling them that they were legally obligated to pay for defendants' audiotext services, despite the fact that the consumers may have never authorized the purchases.

In addition to the Florida-based corporate defendants, Communications Concepts & Investments, Inc., doing business as Crown Communications and Crown Communications Two, Inc., the complaint names corporate officers Lawrence Levinson, aka Larry Levinson, Jordan Levinson and Bruce Levinson. The complaint also names Crown's in-house collection agency, Global Collections, Inc.

"Since October 1997, the FTC has received more than 10,000 complaints about cramming ­ the placing of unauthorized charges on a consumer's telephone bill," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "While the Commission continues its efforts to combat cramming, consumers need to scrutinize their phone bills because creative crammers use a complex set of methods to bill consumers for unordered services."

The complaint also alleges that when Crown billed consumers for these services, the company often had the charges appear on the phone bill as a charge for either a regular long distance or a collect telephone call. Consumers who received these bills had no way of knowing that the charges were actually for a telephone entertainment service, not long distance or collect calls. According to the complaint, many consumers also received bills from the defendants containing charges for long distance calls or collect calls that were never actually placed or received. Many consumers may have paid these bills without ever realizing that they were paying for an audiotext service -- perhaps a sex line or psychic line ­ that they may not have purchased. While consumers generally are responsible to pay for regular phone calls made from their phone lines, they may not be legally obligated to pay charges for audiotext services unless they authorized these charges in advance.

According to the complaint, Crown uses a variety of methods to place charges on consumers' phone bills. For example, Crown solicits consumers to call adult chat lines to "get matched free" with "local singles." When the consumer calls an advertised 800-number for Crown's service, he is told via a recording that he must hang up and someone will call him back. Soon after he hangs up, the consumer receives a telephone call from someone purporting to be a "local single." The complaint alleges that despite the advertising claims that service is "free," Crown charges consumers by placing charges described as a collect call from England or from Florida or as direct dial calls to Toronto, Canada, on their phone bills.

As in the other cramming complaints filed by the Commission, Crown allegedly uses a technology known as Automatic Number Identification (ANI), which is similar to "caller ID," to identify and record ("capture") the telephone number from which the call to its audiotext service was placed. ANI identifies the telephone number from which a call originates, but it cannot identify the caller -- thus, the person who orders and receives Crown's services in many cases is not the line subscriber who receives a bill for Crown's services. Crown uses the number captured by ANI as a basis to generate billing information, which it forwards to billing aggregators who in turn process this data and pass it on to the line subscriber's local telephone company. The local telephone company then includes Crown's charges on the consumer's monthly telephone bill.

According to the complaint, while many consumers successfully disputed the charges with their local telephone company and had the charges removed from their telephone bills, in many cases Crown subsequently used its in-house collection agency, Global Collections, Inc., to collect the charges directly from consumers.

Among the specific allegations in the complaint are that Crown violated Section 5 of the FTC Act and the agency's 900-Number Rule by:

• billing line subscribers for audiotext services which it falsely represents as direct dialed telephone service or regular collect telephone calls.
  
• inducing consumers to call its 800 or other toll-free numbers through advertisements that falsely represent that callers to Crown's toll-free numbers will "get matched free" with "local singles."
  
• using 800 or other toll-free telephone numbers in a manner that results in consumers being called back collect for the provision of audiotext services.

In addition to seeking a permanent injunction, the complaint, which was filed in U.S. District Court for the Southern District of Florida in Fort Lauderdale on December 22, 1998, asks the court to award consumer redress.

The Commission vote to file the complaint was 4-0.

NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

Copies of the complaint and consumer education material about cramming are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. 982-3103)
(Civil Action No. 98-7450)