Most people don’t realize it, but a telephone number is just like a credit card number. It can be used to pay for products and services. Con artists know this. For years, they’ve placed bogus charges on phone bills.

It’s a scam called cramming and from all indications it’s getting worse. According to the Federal Communications Commission, as many as 20 million Americans will get crammed this year. That is, they will be billed for products or services they do not want and did not knowingly order. 

Crammers bill for all sorts of things: credit repair, identity theft monitoring, Internet and e-mail service, psychic hotlines and diet programs, just to name a few. 

The FCC has proposed new regulations to tackle the problem. If approved, the rules would require landline phone companies to list third-party charges in a different section of the bill – to make them easier to spot. They would also be required to notify customers if they offer a service to block third-party charges. (I wrote about this in more detail in July:  FCC Proposes Crackdown on Phone-Bill Cramming.) 

“The common-sense rules proposed by the FCC will go a long way toward protecting American consumers from this abuse,” says Joel Gurin, chief of the FCC’s Consumer and Governmental Affairs Bureau. 

Maybe so, but the attorneys general in Illinois, Vermont and Nevada don’t think the FCC’s proposal goes far enough. They want the commission to ban phone companies from billing for third-party charges that are unrelated to a customer’s phone service. 

“We see this as a rampant, continuing, growing problem,” says Illinois Attorney General Lisa Madigan.

“Most victims don’t even know their phone bill has been crammed.” 

She’s right: an FCC study found that only 1 in 20 cramming victims realize they’ve been scammed. 

“We’ve worked for the last 10 years trying to address this issue,” says Nevada Attorney General Catherine Cortez Masto. “We’ve put regulations in place working with our federal partners and most importantly notifying the public. But it’s not going away.” 

Phone companies say they can handle this
Phone companies don’t like the idea of more regulations and they totally oppose limiting their ability to bill for third parties. 

“It’s really a matter of convenience for the customer,” says Micah Caldwell, vice president of regulatory affairs for the Independent Telephone and Telecommunications Alliance.

She says a lot of people feel more comfortable having a charge from an outside vendor placed on their phone bill rather than using a credit card or electronic transfer. 

The industry points out that its efforts to fight cramming are working. For example, AT&T reports cramming complaints dropped 89 percent between January 2010 and May 2011. 

AG Madigan does not believe the phone companies have been successful at cracking down on crammers.  She points to a recent case her office handled where the bad guys had billed nearly 10,000 customers in Illinois for credit repair services. The victims included a county coroner’s office, a restaurant and a public library’s automated dial-a-story telephone line. 

“It is not good enough to let the industry police itself because it’s not working,” Madigan says. “Instead, we’re saying we need to prevent the industry from having this problem in the first place by banning third-party charges that are unrelated to your telephone service from being put on your phone bill.” 

Walter McCormick, president of the United States Telecom Association, says phone companies are working to authenticate transactions and prevent bad actors from getting access to your phone bill.

McCormick says any customer who reports an unauthorized charge will receive “an instant credit” and be offered the option to block further charges. 

That’s not what I hear from people who complain about being crammed. For example, when David Blume of Peoria, Ill. found $35 crammed on his monthly bill, he contacted his phone company. 

“They said it had nothing to do with them and I would have to contact the companies myself,” Blume tells me. 

There’s a lot of money at stake here. Remember, phone companies get paid for handling the billing for third-party charges. According to a congressional investigation about $2 billion a year is billed this way, and most of this money goes to crammers. 

Senator Jay Rockefeller, chairman of the Senate Commerce Committee, believes Congress must act. He plans to introduce legislation before the end of the year that he says will “stop this harmful practice once and for all.” (Read committee report on cramming) 

But for now – it’s still up to you to protect yourself. 

You do that by checking your phone bill every month. Look for charges that you don’t understand or did not authorize. This is especially important if you use automatic payment, since you’re probably less likely to look at your bill. 

Your best bet is to do what I did. Contact your phone company and see if you can put a third-party billing block on your phone line.  Then, you won’t have to worry about being crammed. 

My two cents
I commend the FCC for trying to do something about the growing problem of cramming. But the proposed rules only make it easier to spot the problem. We need to stop cramming. The proposed ban on third-party charges suggested by the AGs of Illinois, Nevada and Vermont would do that. 

I have another suggestion: make this billing an opt-in situation. Require phone companies to block all third-party charges unless you specifically agree to allow them on your phone bill. This would protect customers and give them ultimate control.

Keep in mind: The FCC’s proposed rules do not cover cell phone bills. As part of this rulemaking process, the commission is asking for comments as to whether they should apply to wireless companies. You know what I think: absolutely!

How to reduce your risk
Sometimes, there’s nothing you can do to prevent a determined crammer from adding fake charges to your phone bill. However, you can avoid giving would-be scammers the opportunity by being wise to some common ploys:

• Enter to win: You think you’re entering a contest, but you’re actually giving your information to strangers who might be up to no good. Before you fill out a contest entry form, consider whether you know the company, and be sure to read the fine print. Shady promoters sometimes use an entry form as “permission” to enroll you in a service. You find out you’re enrolled only if you notice the fee on your phone bill.
• Join the club: The ad says it’s free, and in fact, the number you call to join may be toll-free. All you have to do is say your name and “I want the service.” But you may end up enrolled in a club or service program that comes with a monthly charge on your phone bill.
• File a complaint: If you are crammed and can’t get the problem solved, contact the Federal Communications Commission. They are one of the few federal agencies that will actually go to bat for you. You can reach themonline or by phone at: 1-888-CALL-FCC. You should also file a complaint with the Federal Trade Commission which also prosecutes cramming cases.

More: Cramming: Mystery Phone Charges