Here’s What the FTC Is Doing to Lower Your Mobile Phone Bill

Source: Thinkstock

Source: Thinkstock

While it’s probably safe to say that nobody likes paying their mobile phone bill, the process can be even more unpleasant if it involves paying for items or services that you never even wanted or authorized. Known as “mobile cramming,” the practice of adding unauthorized third-party charges to customers’ phone bills has become an increasingly widespread problem in the mobile industry and has attracted the attention of the Federal Trade Commission (FTC). In early July, the FTC filed a complaint against T-Mobile (NYSE:TMUS) that accused the mobile carrier of making hundreds of millions of dollars from unauthorized charges to customers’ accounts. In T-Mobile’s case, the FTC alleged that the carrier allowed the bogus third-party charges to continue to be added to customers’ bills even after it became obvious that the charges were fraudulent. Meanwhile, T-Mobile was pocketing up to 40 percent of the total amount that the mobile cramming scammers were billing customers for.

Besides filing complaints against T-Mobile and certain mobile cramming operations, the FTC has also taken proactive steps to address the problem in the overall mobile industry. In a recently issued report on mobile cramming, the FTC outlined five “best practices” recommendations that will help prevent mobile phone customers’ bills from being packed with unauthorized charges. The recommendations are aimed at the three major parties involved in mobile cramming: “mobile carriers, merchants who offer goods and services charged directly to mobile phone bills, and billing intermediaries known as aggregators who facilitate the placement of such charges on mobile phone bills.”

First, the FTC recommended that mobile carriers provide consumers with an option to block all third-party charges to their accounts. Like the National Do Not Call Registry that prohibits telemarketers from calling registrants, the ability to block all third-party charges would be an opt-in service for mobile subscribers. However, carriers would have to inform consumers of this option when they first opened their accounts and on an ongoing basis.

Source: Thinkstock

Source: Thinkstock

Second, the FTC recommended that mobile carriers and merchants should ensure that “advertising, marketing, and opt-in processes for charges are not deceptive.” Mobile carriers should closely monitor the third-party charges being added to customers’ accounts to ensure that they are legitimate. Merchants that offer the services should be clear about how much and how often a customer will be charged for the services.

Third, the FTC recommended that “express, informed consent” should be obtained before any additional charges are placed on a mobile phone bill. Records of a consumer’s consent should also be saved. In its complaint against T-Mobile, the FTC alleged that “T-Mobile claimed that consumers had authorized the charges despite having no proof of consumers doing so.”

Fourth, the FTC recommended that third-party charges should be “clearly and conspicuously” displayed on mobile phone bills. In its complaint against T-Mobile, the FTC highlighted a phone bill that buried a third-party charge description in a section that was over one-hundred pages into the bill. The charge was further obscured by being listed in an abbreviated form that didn’t describe what the service was for.

Finally, the FTC recommended that “carriers should implement an effective dispute resolution process.” In the case of T-Mobile, the FTC found that the carrier often refused to give customers full refunds, or would tell customers to get refunds directly from the scammers without providing accurate contact information. It should be noted that T-Mobile disputes the FTC’s allegations and believes that the third-party scammers should be held accountable, instead of the carriers.

While mobile cramming scammers have previously relied on premium SMS billing in which charges would be initiated by a text message sent to a customer’s mobile device, the FTC noted that there has been a recent trend toward “direct carrier billing” in which the charges are made via a mobile website or app. However, the FTC warned that its best practices recommendations should also apply to this new billing mechanism.

Although the FTC’s mobile cramming report was aimed specifically at unauthorized premium service charges on mobile phones, the agency has also recently taken steps against sketchy billing practices in other mobile industry businesses. Earlier this year, the FTC reached a settlement with Apple (NASDAQ:AAPL) over consumers’ complaints about millions of dollars of unauthorized in-app purchases made by children while playing kids’ mobile apps. The FTC is currently pursuing a similar complaint against Amazon (NASDAQ:AMZN) over its in-app purchase policies. Meanwhile, on the other side of the Atlantic, the European Commission has asked Apple and Google (NASDAQ:GOOG) (NASDAQ:GOOGL) to make other in-app purchase policy changes based on its consumer protection concerns.

So will the FTC’s recommendations put an end to the practice of mobile cramming? Since the FTC’s report only offers “recommendations,” mobile carriers, merchants, and aggregators are not legally obligated to implement the changes. However, with the mobile industry’s billing practices coming under increased scrutiny from regulators around the world, it would seem that adopting the agency’s best practices recommendations would be an astute move for the industry as a whole.

More from Tech Cheat Sheet:

Follow Nathanael on Twitter (@ArnoldEtan_WSCS)