In the Federal Trade Commission’s first lawsuit over mobile cramming, Wise Media and two individual defendants agreed to a permanent ban on placing unauthorized charges on telephone bills to settle allegations of cramming charges on consumers’ cell phone bills.
The Atlanta-based company’s actions resulted in more than $10 million in unauthorized billing for “premium services” such as text messages featuring horoscopes and love tips, the agency said. Wise Media signed up and repeatedly charged mobile phone users $9.99 per month for the texts without their knowledge or permission, according to the FTC’s complaint.
Cramming has long been recognized as a problem on landline phone bills (the FTC noted that it has brought more than two dozen such cases) and the scam is now being repeated in the mobile ecosystem. “This case involved a new delivery system for an old-fashioned scam,” Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, said in a statement about the settlement. “Getting consumers’ consent before charging them is as basic a consumer protection as you’ll find, whether you’re dealing with a brick and mortar store or with a mobile payment provider.”
The defendants sent texts to consumers suggesting that they had already subscribed to the service. Those that didn’t ignore the texts and responded that they didn’t want the service continued to get charged, the agency alleged. Many consumers either didn’t notice the charges on their bills or – because of the abbreviated manner in which the charge was listed and the fact it did not designate Wise Media as the source of the charge – did not understand.
Mobile phone users who did manage to decipher the charges made by Wise Media faced a nearly impossible task to get the charges stopped and obtain a refund, the agency said.
In addition to the ban on cramming, the defendants are prohibited from using any other method to charge consumers for goods or services without express agreement to be charged or assisting others in placing unauthorized charges on telephone bills. The deal also included an almost $11 million judgment, most of which was suspended due to an inability to pay, with the exception of assets of the individuals and the remaining assets of Wise Media, estimated to be about $500,000.
To read the complaint and stipulated agreement in FTC v. Wise Media, click here.
Why it matters: In addition to the FTC, state authorities also have their eye on cramming. A coalition of 45 state attorneys general recently reached an agreement with three of the biggest mobile phone carriers to stop allowing “premium SMS” charges on users’ phone bills. Several of the major national wireless carriers will no longer allow the third-party charges on their customers’ mobile bills, which the AGs said accounted for the “overwhelming majority” of cramming complaints.