Time to Get Serious About Fake Fees on Phone Bills

Watch out for sharks waiting to take a bite out of your phone bill

This column hereby adopts the firm position that companies shouldn’t charge customers for services they never ordered or received.

You’d think this might be obvious, but apparently not. The Federal Communications Commission estimates that 15 million to 20 million U.S. households incur “mystery fees” on their landline phone bills each year.

The practice of lumping such unauthorized charges onto bills, either by phone companies or third parties like chat lines or psychic readings, is known as “cramming.” It’s illegal, but often goes undetected.

Which is why lawmakers and regulators are considering additional ways to halt the practice. It’s also why they should go further than the proposals on the table today.

The FCC says that only about 5 percent of customers notice these charges, because who in this age of automatic bill pay still regularly checks the paperwork? And even for those who do, good luck teasing out any logic from the tangle of line charges, excise taxes and portability fees.

$2 billion a year

The Senate Commerce Committee last week released results of a yearlong study that found about 300 million third-party charges that show up on bills each year, a large percentage of which are unauthorized. The fees add up to about $2 billion annually, and the phone companies typically get a cut.

To me, this is evidence of fraudulent, illegal activity that hurts consumers,”said Parul Desai, policy counsel at Consumers Union in Washington.

Committee Chairman Jay Rockefeller, D-W. Va., said it’s clear that voluntary industry efforts to prevent the fees haven’t worked, raising the specter of legislation that would hold the phone companies responsible.

That would go a long way toward forcing these businesses to clamp down on the actions of third-party billers, Desai said.

Also last week, the FCC proposed rules that would require landline phone companies to separate and clearly spell out third-party charges on bills, and to conspicuously remind people of the option to block them. They’re now seeking public comment on whether to extend cramming rules to mobile and Internet phone services.

Here’s ours: YES! And don’t stop there.

Not just phone bills

The practice is by no means limited to phone service. A Chronicle colleague recently spotted unexplained charges on his Comcast bill. After hashing through the fees with a customer service rep, he was left with a $54 charge for a cable box he’d never ordered or received. The rep called it a “ghost charge” and promised to remove it from the bill. The ghost has yet to vanish.

Enter the terms “ghost charge” and “Comcast” into your favorite search engine, and a host of similar complaints pop up. Many involve pay-per-view movies that people insist they never ordered.

One’s left to wonder how much Comcast and other businesses make when customers don’t notice these convenient mistakes. The company didn’t respond to an inquiry.

Requiring that these charges be spelled out on a bill, instead of deduced through a 40-minute conversation with a customer service rep, would be a good start.

But the FCC proposal doesn’t apply to cable companies. Nor would it help the far bigger portion of customers who simply can’t be bothered in their busy lives to thoroughly review every bill.

‘Sharks out there’

The big problem is that there are sharks out there who want to take advantage of customers who either don’t have time or can’t understand their bills,” said Mindy Spatt, spokeswoman for The Utility Reform Network.

At the Senate hearing last week, industry representatives insisted that they already take numerous steps to address cramming, including: requiring third-party billers to go through an application process, providing customers with instant credit for unauthorized charges, and allowing them the option of blocking all third-party charges.

These measures, taken together, can have dramatic results,” said Walter McCormick, chief executive of the United States Telecom Association.

Perhaps they can, but the government stats suggest they haven’t.

Here’s an ever better approach than clearer bills: Levy such huge charges against any type of company any time they tack on mystery fees that they never dare do it again.

Last year, the FCC slapped Verizon Wireless with a $25 million fine and forced it to refund more than $50 million to customers for overcharging subscribers for its pay-as-you-go data plans.

Last month, the commission proposed fining four long-distance companies $11.7 million for allegedly cramming customers to the tune of about $8 million.

Big penalties plus refunds set the right template, but let’s go bigger still. Let’s not treat this like a clerical error that happens to be systemic, let’s treat it like what it is: theft.