WHAT IS CRAMMING?

  • Cramming has been defined as the practice of placing unauthorized, misleading or deceptive charges on consumer telephone bills.
  • The Federal Trade Commission ("FTC") is of the opinion that crammers typically rely on confusing telephone bills in an attempt to trick consumers into paying for services that they did not authorize or receive, or that cost more than consumers were led to believe.

FTC COMPLAINT:

  • In December 2013, the FTC filed a cramming complaint against Lin Miao and assorted corporate defendants.
  • The FTC alleged that defendants pitched premium SMS message services offering "love tips," "fun facts" and celebrity gossip alerts, and placed charges for these services on consumers' mobile telephone bills, without their permission.
  • The complaint also alleged that defendants used deceptive websites designed to collect consumers' mobile phone numbers that would be billed for the services.
  • Here, the charges that appeared on consumers' bills had confusing identifiers, and in many cases, unwitting consumers did not notice the variations in amount of their bills from one month to the next.
  • Consumers who did notice the unauthorized charges often attempted to obtain a refund, but the complaint alleged that not only was the refund process highly cumbersome, but consumers often did not actually receive the refunds promised by defendants.

SETTLEMENT:

  • Defendants agreed to surrender more than $10 million in assets to settle the FTC charges.
  • Miao and the corporate defendants are also permanently banned from prospectively: 1) placing any charges on consumers' phone bills; 2) making any misrepresentations to consumers about a product or service or a consumer's obligation to pay for same; or 3) charging consumers for a product or service without obtaining their express consent.
  • While the monetary judgment was more than $150 million, the amount was partially suspended due to Miao's inability to pay the full amount after surrendering virtually all of his and the companies' assets.

TAKE AWAY:

  • The FTC is committed to going after companies and individuals who engage in cramming activities.
  • This is another illustration of the Commission's dedication to protecting the innocent consumer in the digital age.
  • Companies who bill consumers for products and services via their mobile phones must do so in accordance with applicable laws and carrier guidelines.

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