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FTC Puts $1.9M Kink in Phone Bill Crammer's Wallet 72

Posted by ScuttleMonkey
from the slap-on-the-wrist dept.
coondoggie writes to mention that the three largest companies in the billing aggregation market have been hit with a $1.9 million fine in response to the more than $30 million in bogus charges added to consumer's bills. The ringleader of the scam however, Willoughby Farr of Nationwide Connections, has been hit with $35 million and a lifetime ban. "Today's settlement would prohibit the companies from misrepresenting that consumers are obligated to pay for telecommunications charges that have not been expressly authorized. It also would be barred from billing or submitting any telecommunications charges for billing on a consumer's telephone bill unless such charge has been expressly authorized. [...] The FTC still has a case pending against other principals in this case: Yaret Garcia, Erika Riaboukha, and Qaadir Kaid. One other defendant Mary Lou Farr, has already settled with the FTC."
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FTC Puts $1.9M Kink in Phone Bill Crammer's Wallet

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  • That sucks. I can't can't comprehend where charges are coming from.
  • I tried to understand the article title... but my head asplode.

  • What about Telcos? (Score:2, Interesting)

    by heteromonomer (698504)
    So why aren't the Telcos themselves not being punished? Surely the billing companies are not in this alone.
    • Re: (Score:3, Interesting)

      by esocid (946821)
      I would think that while they may not have been actively ripping off their customers, they probably were somewhat aware of what was going on. I mean people had to have called their provider and complained before getting transferred to these billing companies. And even if they weren't aware, did they get a cut of the loot or was the billing company pocketing it all?
    • by the_rev_matt (239420) <slashbot@@@revmatt...com> on Friday March 14, 2008 @03:30PM (#22753982) Homepage
      I just called to get one of these scam voicemail services removed from my account (interesting: if you called the number the voicemail was supposedly active for, it would ring 15 times then go to fax tone). The rep from the VM company indicated that pretty much anyone can sign up pretty much anyone else for this voicemail service on some web page somewhere and the company doesn't care because they can bill it.

      The rep from ATT was pretty bothered by my explanation of what happened and opined that there was no way it should be legal and that it was bad business for ATT to even bill for this crap. Then he spent 20 minutes going over every service we have on our account and giving me the lowest price available for the ones we wanted to keep and eliminating the rest. Cut my bill by about 30%.
    • by tompaulco (629533) on Friday March 14, 2008 @04:53PM (#22754796) Homepage Journal
      The telcos willingly pass through the charges to you because they receive about 1/3 of the revenue. The telcos need to be punished as well. They basically want to act like a credit card which always gives the benefit of the doubt to the company that put the charge on the bill. I say, if they want to be like a credit card, then they need to abide by the regulations of the credit industry. In the credit industry, if you question a charge, they immediately place it into a suspect status, and you don't have to pay it until it is resolved. With the telcos, if you call and question it, they give you the runaround, and even if they do agree to investigate, you still have to pay the charge until they make their decision on the charge, and if you don't then they will cancel your phone service and report you to the credit bureaus and collection agencies.
  • The three companies -- BSG Clearing Solutions North America, ACI Billing Services, and Billing Concepts -- control more than 85% of the billing aggregation market, in which aggregators contract with local telephone companies to bill on behalf of third parties, the FTC said.

    How weird. Companies in a potential monopoly abuse their position? The FTC needs to decentralize this shite since corrupt individuals can't seem to keep their hands out of people's wallets. Luckily I've not been involved in fraud like thi

    • Re: (Score:3, Interesting)

      by cdrudge (68377)
      By definition, how can 3 completely separate companies be a monopoly. I think oligopoly would be a better term.
      • by esocid (946821)
        I was trying to define them collectively but you're right, oligopoly is better.
      • by Xtifr (1323)
        From Bouvier's Law Dictionary, Revised 6th Ed (1856) [bouvier]:

        MONOPOLY, commercial law. This word has various significations. 1. It is the
        abuse of free commerce by which one or more individuals have procured the
        advantage of selling alone all of a particular kind of merchandise, to the
        detriment of the public.
        2.-2. All combinations among merchants to raise the price of
        merchandise to th
  • Great he got fined.....but what about giving that money to the people that were screwed over? This once again makes me wonder. The BSA, RIAA, MPAA they all keep the money they get and never pass it on.... Can you hide money by calling it a fine, and not restitution?
  • by FredFredrickson (1177871) * on Friday March 14, 2008 @03:03PM (#22753722) Homepage Journal
    Here's how it works, They overcharge you an extra $1.

    Some percentage of their cusomters will notice the $1, while most may not notice at all.

    Out of the customers that notice, X amount will take action and call the company

    The company Rep will respond that instead of receiving and immediate refund, they will put the "refund" into the system and it may take a while to process.

    1 Month goes by and out of the small percentage that took action a month ago, a smaller percentage will realize that the refund never went through and call again.

    The Rep will apologize and either deny the refund's existance, claim to "not have access to the records," or some other BS excuse. They will promptly "issue" a refund for you.

    You may at this point recieve a $1 credit to next month's bill. Never a refund.

    So by the end, 3-5% of the mis-billed customers may actually get their refund/credit. During the one and a half months it took to "process" the refund/credit, company that handles billing made X% interest on the overbilled cash. They made out like bandits on the refund thanks to the fact that it's done in such mass quantities. It benefits the company largely to have billing errors.

    The other 95% of customer who never noticed lose $1 each. Cumulatively, the company with a 30 Million subscriber base makes $28 Million off a single billing error.

    Of course, to make it look like a mistake, there won't be a 100% customer base billing error, but you get the idea.

    The only way to rectify the issue is demand not only a refund but also interest on the money they stole, as well as credit towards the administrative overhead it took for you to navigate their phone menus for hours on end.
    • by xstonedogx (814876) <xstonedogx@gmail.com> on Friday March 14, 2008 @04:32PM (#22754592)
      Comcast is doing exactly this with me now, only the problem is $17.99.

      I picked up a new box at the store (to get HD content). They didn't activate the box properly at the store. (I don't believe it was an accident, because the same exact thing happened to my dad not a month before it happened to me - and we are in different areas.) I contacted tech support and they couldn't activate it from there either. I don't think they even tried because the box literally did nothing when they said they tried. They told me they would have to send out a tech, but did not mention anything about having to pay. The tech was here for about two minutes, did exactly what I did over the phone with tech support they were miraculously able to activate the box.

      I contacted them and told them to pound sand. They said they would refund the money. They didn't refund me the next month. My next bill should appear any day now. Since I received the same exact canned response, I don't expect to see a refund this month either. Won't they be surprised when I issue a charge back with my credit card company, complain to the FTC and others, and become a former subscriber.

      The part that really pisses me off is that I was already paying them more than most customers probably pay (I'm a stay-at-home dad until Fall, so I can justify it pretty easily), and by adding this box I was actually increasing my bill.
      • by plague3106 (71849)
        Well, your mistake was getting Comcast for service.
        • by Mr2001 (90979)
          His first mistake was getting an HDTV. $17.99 a month is nothing compared to the premium he paid for getting a DRM-infested digital TV instead of a cheap analog one.
    • by gad_zuki! (70830)
      So when are they going to get the "Hey kids, text this number now!!" (small text flashes on the screen about subscribing to a service and being billed 20 dollars a month) Phone billing and fraud go hand in hand.
    • Yet those goofballs will send me a check for 6 cents. I hate these guys yet I end up being a customer (TCI Cable -> AT&T Broadband, Pacific Bell -> SBC -> AT&T).

      Check [imagebay.com]

    • by jwiegley (520444) on Friday March 14, 2008 @05:52PM (#22755224)

      My damn union just started doing this sort of deceitful, unethical crap. I'm a teacher. Teachers like myself in California are represented by the California Faculty Association (CFA). You do not have to be a member of the union, you can choose not to be. However if you choose not to be then the union still legally charges you 75% of the dues a normal member pays. Their argument is that the union negotiates and defends to the benefit of all employees and thus all employees should pay their fair share, known as an agency fee. Because California is not a right to work state you cannot refuse to pay. If you do then the union can mandate that you be fired.


      I would argue that the union doesn't represent me. Every action they take punishes people in my position and is aimed at rewarding the less competent, less educated or lower paid instructors. So what does this all have to with the article?


      Starting last month the union started deducting 100% of dues from non-members. These people are not given the same rights and privileges as members. Oh, buried on the second to last page of a yearly CFA report is the information that you can object to the additional 25% if you send a written letter with personal information to the CFA. It's just like the damn phone company. I know they did it just hoping that some percentage wouldn't notice, or wouldn't bother, to send such a letter in.


      The thing that really bugs me is how is this even legal??? If they can just arbitrarily take an extra $10.00 from my paycheck why not, $50, $500?? How is it legal to reach into another man's salary and take something that is not legally owed to them?


      Ayn Rand had it right.

      • It's not an it is time for a revolution. Hope you all participate.
      • jwiegley, Under the U.S. Supreme Court case "Communications Workers v. Beck, 487 U.S. 735 (1988)" unions cannot use non-union dues to pay for political activities. They are technically restricted to collective bargaining, contract administration, and grievance adjustments (i.e., related directly to the contract of employment and its administration and terms and conditions). However, many unions take 100% of the fees and do as you described, required employees to opt-out if they object. Last year, the U.S
      • by sartalon (887122)


        "Teachers like myself in California are represented by the California Faculty Association (CFA). You do not have to be a member of the union, you can choose not to be. However if you choose not to be then the union still legally charges you 75% of the dues a normal member pays."

        I seem to remember Gov Schwarzeneggar submitting a proposition that would require people to have to "opt in" in order for the Union to withdraw from teacher's pay checks. I also remember the storm of anti-Arnold ads that quickly ens
      • by xenocide2 (231786)

        Because California is not a right to work state ...
        This information is contrary what I've read about Right to Work and California.
    • These mistakes just don't happen. I have worked on enough billing systems to understand them. Data doesn't appear randomly by accident it always has a source.

      The time has come where companies need to pay for the labor spent by consumers to get problems resolved I am thinking it should be about 1.00 per minute.

  • Great. (Score:2, Insightful)

    Now if only they'd do something about the "Joke of the Day" scam that's been going around. jokemobi.com and any similar group should be fined out the asses for that crap.
    • I'm not familiar with the 'scam' aspect. What are they doing wrong?

      Obviously their 'service' isn't worth it, but it seemed straightforward to my cursory review.
      • by vux984 (928602)
        I'm not familiar with the 'scam' aspect. What are they doing wrong?

        They are 'enrolling' people in subscription programs automatically billed to their cell phone bill, often without anything approaching consent of the person paying the bill. These services are often extremely difficult to cancel. And the charges you accumulate before managing to cancel are often extremely difficult to have reversed. And lets not even talk about people on pre-paid.

        If someone gets a hold of your number and whores it around you
        • by mortonda (5175)

          such as large TV adds that say "TEXT JOKE to xxxxx for a joke of the day" shown during kids shows... and only disclose that this is enrolling you in a recurring service that will charge you $1.50 per message, per day in the scrolling fine print. Not that the kids doing this will read it, or care. They don't pay the bill, you do.

          Well, the problem here is parents giving their children access to something that is connected to finances with no control over it. Technically, I'd call this a security hole. Bugtraq anyone?

          When and if my kids get cell phones, it will be set up so that those phones are incapable generating new charges. (Cell phone providers, are you listening? This is a make or break deal)

          Personally, I will not allow text messaging of any kind on my bill at all, until they stop charging extra for it - it's a sham anyway

          • by vux984 (928602)
            Well, the problem here is parents giving their children access to something that is connected to finances with no control over it. Technically, I'd call this a security hole. Bugtraq anyone?

            First, how are we supposed to realistically avoid giving our kids access to our telephones? Between voip and cellular I have no need of a landline.

            Second, kids don't need access to the phones to enroll. They can do it on the library computer at school. Nor does it have to be your kids, or even someone you know. If someon
  • Disproportion..... (Score:5, Insightful)

    by IHC Navistar (967161) on Friday March 14, 2008 @03:23PM (#22753908)
    How can the phone companies, or any company, be fined so little when the actual theft was far more? I mean, a $1.9 million dollar fine for $30 million worth of fraudulent charges?

    1: Charge $30 million in fraudulent charges.
    2: Generate gross fraud revenue of $30 million.
    3: Customers report you.
    4: FTC fines you $1.9 million.
    5: KEEP PROFIT of $28.1 million.
    6: Lather, rinse, repeat.

    (Now that I think about it, this could be a buisiness model/method. I CALL PATENT!)

    If a company makes more from fraud than it has to pay in fines, where is the deterrent? 28.1 million in retained fraudulent revenue won't discourage anything.

    A better way:

    1: Fine the company 50% of fraud revenue.
    2: Force restitution of 100% of fraud revenue

    If the combined amounts of the fine and fraud revenue exceed the total profits and cash reserves of the company, then allow the company to pay in installments that will allow the company to continue operating so that both the fine and restitution can be paid back, with restitution to defrauded customers taking priority over the fine. If the company keeps up fraudulent activity to the point where payments continually compound onto one another and the company cannot make all its payments because the amount exceeds it's profits and cash reserves, then the company, assets and all, is sold off to competitors or creditors, and the assets of responsible executives are used to reimburse shareholders, consumers, and creditors.

    Fines need to be a *DETERRENT*, not an inconvenience.
    • RTFA (Score:5, Informative)

      by bkaul01 (619795) on Friday March 14, 2008 @03:39PM (#22754066)

      The $1.9 million restitution agreement is in addition to the almost $35 million the FTC is collecting from the person the FTC considers the ringleader of this scam, Willoughby Farr of Nationwide Connections.
      They're confiscating the full amount, plus fining them an additional $1.9M. So, the guilty parties will have lost at least $2M on the deal once legal costs, etc. are accounted for. How is that not a deterrent?
      • Re:RTFA (Score:4, Insightful)

        by OnlineAlias (828288) on Friday March 14, 2008 @04:42PM (#22754702)

        Fraud is fraud. It is illegal. Put the executives in jail and shut the company down. Have we as a society gotten so accepting of the corporate culture of greed and scams that outright fraud should be punishable by simply not making as much profit?
        • by MLease (652529)
          Have we as a society gotten so accepting of the corporate culture of greed and scams that outright fraud should be punishable by simply not making as much profit?

          Yes.

          -Mike

        • Yup. >sigh
      • They're confiscating the full amount, plus fining them an additional $1.9M. So, the guilty parties will have lost at least $2M on the deal once legal costs, etc. are accounted for. How is that not a deterrent?
        They're confiscating the money? Does this mean I get my two dollars back? I want my two dollars!
      • by whit3 (318913)
        The bogus charges were handled through an intermediary. Most of that
        $30 million went to the scammers, but a fee was paid to the intermediary
        (which is the same organization that would handle complaints.).

        The $1.9M is a fine to the billing middleman, who should have
        known there was fraud afoot and will, in future, have to be
        more careful. Since the middleman only profited by a small fee
        on the fraudulent transactions, the fine is a small fraction of
        the amount of the fraud.

        I should say, the presumed amount of
      • They're confiscating the full amount, plus fining them an additional $1.9M. So, the guilty parties will have lost at least $2M on the deal once legal costs, etc. are accounted for. How is that not a deterrent?

        Because the probability of being caught is less than 1.

      • Re: (Score:3, Insightful)

        by TheLink (130905)
        "How is that not a deterrent?"

        Because the company probably wouldn't have that money anymore, it's mostly gone to the bosses.

        So the company goes bust and the bosses live happily ever after.

        They might even be able to do it over and over again, I'm sure there are plenty of tricks :).

        Whereas if you jail the bosses for massive fraud it is a deterrent, since for the X years they are in jail they can't enjoy the stuff they bought or could buy. Everyone has a limited lifespan, the richer you are the less you want t
      • by Dan541 (1032000)

        The $1.9 million restitution agreement is in addition to the almost $35 million the FTC is collecting from the person the FTC considers the ringleader of this scam, Willoughby Farr of Nationwide Connections.

        They're confiscating the full amount, plus fining them an additional $1.9M. So, the guilty parties will have lost at least $2M on the deal once legal costs, etc. are accounted for. How is that not a deterrent?

        These days you'd think scammers would have the sense to use Swiss bank accounts.

        ~Dan

    • by Dan541 (1032000)

      How can the phone companies, or any company, be fined so little when the actual theft was far more? I mean, a $1.9 million dollar fine for $30 million worth of fraudulent charges?
      In western society we call it justice.

      ~Dan
  • Has anybody ever noticed that the bulk of the FTC settlements pretty much state: "so-and-so is prohibited from doing things in the future that they never should have done anyway. They must pay $xM dollars, which they don't have, so they are really going to pay $5."

    No criminal charges for fraud referred to DOJ, etc.

    Is the lesson here: "You can scam folks as much as you want, and only have to stop once the FTC catches you and all of your profits are secreted away in offshore accounts?"

    SirWired
    • I wonder if you can go to prison for unpaid fines of that magnitude? Anyway, the big cheese has a lifetime ban, he'll need a new scam.
  • by flyingfsck (986395) on Friday March 14, 2008 @03:31PM (#22753996)
    After the phone companies, banks and CC companies are the bloody worst. How many times have you received a 'new revised terms' leaflet in the mail from your bank? Did you sign the contract and send it back? Yeah, thought not. Those tend to outnumber other forms of junk mail in my mailbox...
    • by Duhavid (677874)
      And this is part of how you know who has the power in this "relationship".

      Send them a revised set of terms, see how far that flies.
  • It seems like the govt. agencies involved are always collecting and pocketing the fines? What about the fucked over consumers? Do they get their money back?
  • THEY should be the ones getting fined, since they enable this highway robbery in the first place. And what do you bet that the telcos collect some kind of third-party billing fee up front from *anyone* wanting to bill to a phone number, whether the money gets collected or not?

    The whole notion of billing people through the phone bills was a scam from the word go, and IMHO the FTC should ban it *all* or require that consumers setup a separate billing account for non-telco related charges unlinked to their ph
  • $30 million in bogus charges
    -
    $1.9 million in fines
    =
    $28.1 million of free stolen money!
  • My Own Experience (Score:4, Informative)

    by CyberGarp (242942) <Shawn&Garbett,org> on Friday March 14, 2008 @05:08PM (#22754916) Homepage
    So one day I discover that Sprint is my long distance carrier at $5/minute. I protest the "slam" to the FCC. The FCC rules that its a valid transfer, since it came from a website and they don't regulate those transfers.

    I tell BellSouth and Sprint that I will only pay the fee my original carrier I had negociated (40c/minute to east europe), otherwise I will see them in court. I document every correspondence, record every phone call. Each time I send them another letter saying I'm not paying for a service I didn't ask for, I include a xerox of all previous letters and transcripts. The packets grow thicker and thicker.

    My stance was simple, You can't make me pay for something for which I didn't agree too without a contract. The FCC was off base ruling that this was legit. Please produce a signed or verbal proof of a contract with Sprint. BellSouth kept trying to collect for sprint and this went on and on.

    So I sent a letter that if something didn't happen I would file in court and we could resolve the situation there.

    Then the call came, "Ahhh, Mr. Garbett, we've been reviewing your file. You are talking about challenging our arrangement with other service providers under contract law is this correct?"

    "Yes"

    "Well, you have to understand that's a delicate matter. No one has done that before. We make a lot of money off this arrangement. How does a year of free service sound?"

    "Okay"

    "So you agree to drop the matter, and we will credit you for a years service based on your history and drop the charge-- Do you agree to these terms."

    "Yes"

    And there it was, a year of free service. I've been waiting for several years since then for a large enough abuse of this system that a class action forms. I find it all mildly amusing.

    • Sprint tried screwing me over from day 1. Every month I had to sit on the phone dealing with BS automated voice lines, bright employees, etc. But by sticking to it, I now have 4 phones all with unlimited internet, and text messages for $90/mo. If I'd been more of an ass, I probably could have gotten more.

      The point is, we shouldn't put up with this crap. Demand not only a refund, but something for your time and lost trust as well.
  • The citizen consumer needs to organize ourselves as consumers to stand up against the few that benefit to the detriment of the many?

    The citizen consumer is the most powerful group if we are not divided by the fictions that those who benefit create to divide us.

    If we all simply decide not to pay the cable bill this month, they are instantly doomed because the are dependant on the cash flow.

    It is that simple

    We need to redesign the systems designed to create and maintain an indentured servitude.

    I w

  • I worked for awhile at a dialup internet subsidiary of SBC (now AT-AT) and we had the power of issuing credits. I would listen to customer's complaints, do some checking, and issue proper refunds. Until I was taken aside and warned not to do so, that customers would have to arbitrate it further in order to get their credits (of course, never refunds)

    One of the phenomenons that kept us busy were non-computer customers; many times, if you called up the main customer service line, they would add dial-up in
    • by chaosdot (1232158)
      Forgot one other fun aspect of this; if you were a new customer, you just might get the old phone number's dialup account transferred to your new phone's bill, because the dialup had to be canceled separately from the phone line.

      It was a lot like these Bill Crammers, only with the telco's own logo and 'approval'.
  • Over the past year, I've had to deal with just one case of outright fraud. Someone in another state somehow managed to charge a $500 wig to one of my BoA credit cards. I hadn't used that card in a few months. Took one phone call and one letter and perhaps an hour of my time to successfully dispute the charge and close that account.

    I've had way more trouble dealing with corporate "mistakes" than with outright fraud. A company calling itself "Today's Escapes" somehow got a $20/month membership fee start

  • "...a $1.9 million fine in response to the more than $30 million in bogus charges added to consumer's bills"


    I see. And $30M - $1.9M is still $28.1 MILLION DOLLARS in profit. Yeah, that fine sure showed them the error of their ways.

    </disgusted>

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