Crimes of Persuasion

Schemes, scams, frauds.

Cramming of Unauthorised Service Charges, Subscriptions on Bank Accounts, Credit Cards or Telephone Bills Fraud

Cramming, the number one telemarketing scam of 1998, refers to putting unauthorized or nonexistent telecommunication or service charges on your credit card, bank account or phone bill.

Con artists have found the telephone billing and collection system to be a fertile area to defraud consumers.

Taking advantage of changes in the telecommunications industry that began years ago with the break up of AT&T, these cons arrange to put unauthorised charges on consumers' phone bills for services that were never ordered, authorized, received or used.

Sometimes a one-time charge for entertainment services will be crammed onto your phone bill. Other times it may be a recurring monthly charge.

Cramming of recurring charges falls into two general categories: club memberships, such as psychic clubs, personal clubs, or travel clubs; and telecommunications products or service programs, such as voice mail, paging, and calling cards.

The charges may just appear on your phone bill as a charge for either a regular long distance or a collect telephone call.

People who receive these bills have no way of knowing that the charges are actually for a sex line or psychic line and not long distance or collect calls so they pay without ever realizing.

Automated Phone Number Capture

Anyone capable of capturing a consumer's telephone number can cause charges for a product or service to be included on that person's phone bill.

Using Automatic Number Identification (ANI), a system similar to "caller ID," they can capture the phone number from which a call to the party originates.

Thus, the only thing needed by scam artists that have ANI is a method of inducing you to call them.

You don't even need to divulge credit card or other account numbers in order to be billed. Similarly, phone numbers can be obtained, without high-tech equipment, through purported sweepstakes that require a phone number on an entry form, or even through simply drawing numbers at random from the telephone directory.

It is not possible for the owner of the telephone line to block telephone number capture through ANI on calls that they themselves or others place from their phones, and it is not possible to prevent others from access to their phone number.

The person placing a call or otherwise providing a telephone number may not even be you.

Shortly after the introduction of 900 numbers, this technology was used by unscrupulous operators to deceive and defraud consumers.

Once the call was placed, they were billed for the alleged service or information and the unwitting victim often had no means to contest the cramming charge.

In many cases, they never even received the promised information or service.

Here are some common ways crooks get your phone number and cram charges onto your bill. You may never get the service —just the bills.

800 Number Calls

You call an 800 number advertised as a free date line, psychic line or other adult entertainment service.

A recording prompts you to give your name and to say "I want the service," or some similar phrase, to get the advertised free service.

You may have no opportunity to speak with an operator or ask questions, but you are automatically enrolled in a club or service program.

The phone number from which you call is captured and billed. You often never get the "free" service you called for, or the service you're billed for.

Sometimes a recorded voice directs you to press one or more specific keys on your phone to be transferred to an adult entertainment or chat line.

If you do, you are connected to the service of your choice but the charge for the service then appears on your bill as an international long-distance call.

Contest Entry Forms

You fill out a contest entry form, thinking you're entering to win a prize.

In fact, some unscrupulous promoter is using the contest to get your phone number, enroll you for a calling card or some similar service, and bill you on your phone bill.

The disclosure on the entry form, which is very difficult to comprehend and in very fine print, says that by completing the form you agree to pay $4.95 a month for the company's services.

Direct Mail Sweepstakes

You receive a sweepstakes promotion in the mail that tells you to dial an 800 number to enter or claim your prize.

When you call, a recording follows an automated script to enroll you in a club or service program.

The phone number from which you call is captured and billed with an unauthorised charge.

Once again, the disclosure on the sweepstakes mailer is very difficult to comprehend; is in very fine print, or is a "negative option" billing, so unless you respond to refuse, they sign you up.

"Instant" Calling Cards

Someone may use your phone to call an 800 number for an adult entertainment service, and be offered an "instant calling card."

The "calling card" isn't an actual card, but is rather an access process linked to the phone number from which the call was placed, whether or not they are made from your phone.

Dating Service Calls

You call an 800 number advertised as a way to meet local people for free.

You're told your date will call you back, or you're asked to enter a code to be "teleconferenced" with your date.

What you're not told is that you'll be charged a hefty fee for your conversation with your date.

International Calls

Some ads for adult entertainment services tell you to call a number starting with 011, 500, or another unfamiliar area code.

The ads don't explain that these numbers are for expensive international calls, and that the entertainment provider is making money every minute you stay on the line.

"Free Minutes" Deals

You may see ads promising "free time" for a date line, psychic line, or other adult entertainment service.

When you call, you're put on hold but told that you won't be charged for this time. Sometimes, the "hold time" is deducted from your free minutes.

In fact, you may be billed for some of your hold time as well as your talk time.

Hurry Up and Call

You get an e-mail, fax or even a call on your pager which says to call this number immediately, there's been an accident or sickness in your family, or outstanding bills you owe are past due, but it turns out to be just a mix-up when you call.

While connected you get a lengthy recorded message or person pretending not to understand what the call is about so as to keep you on the phone longer.

You are actually being billed an unauthorised charge for the call at anywhere from $6.99 - $25 per minute.

It pays to ask the operator for the location of any strange number prior to calling.

Cell Phone Spamming Becomes Indirect Cramming

Cell phone users in Tokyo are regularly bombarded with hundreds of unwanted e-mail messages as well as the newest mobile come-on: the one-giri spam scam.

One-giri is Japanese shorthand for computers that dial numbers randomly, ring once and hang up.

The callers - usually dating services that phone thousands of numbers randomly - are themselves not charged because no one picks up but the incoming call leaves a phone number on the receiver's handset.

Curious to see who called, unsuspecting Japanese redial and get an offer such as "press 1 if you want to meet a friend, press 2 if ..." which they generally rush to refuse, lest they run up extra charges.

NTT DoCoMo, which runs the market leading i-mode service, processes 950 million cell-phone data messages a day, yet a staggering 85% of them are sent to nonexistent addresses, most by computers that randomly generate numbers and send messages searching for active accounts.

The company, which will spend $8.7 million this year to block unwanted bulk mail from entering its servers, says one-fifth of the 30,000 complaints it received in October were about annoying e-mails.

In addition to suffering bad public relations, the carriers are seeing their network computers overload and the slowing of transmission times as shady programmers continue to develop algorithms sophisticated enough to bypass server walls and create lists of valid addresses that can be resold.

While Japanese cell-phone providers are urging users to change their addresses frequently and to refuse to return calls from unknown numbers, people are still spammed on a regular basis at their own expense.

This digital epidemic will soon spread beyond Japan's shores as DoCoMo is preparing to introduce its i-mode network in Europe.

All the Wrong Places

Looking for companionship you decide to try a service advertised in the newspaper as a "free matching" service with "local singles".

You are urged to call a toll-free number. When connected they ask you where you are calling from and what sort of person you want to meet.

They tell you that they will have a "local single" return the call, then hang up.

Shortly thereafter, you begin receiving return calls, often many, over the course of several days from the services' employees posing as "local singles."

They do not disclose in the first call, or during any of the return calls, that there is to be an amount charged, contrary to the advertising claim that the service is "free".

Nevertheless, when you later receive your phone bill, you are shocked to find exorbitant charges —described as collect or direct calls from a number in Florida, England or some other distant locale —billed to your telephone number at the rate of about $4 per minute.

In a number of instances, the bills have reflected two calls allegedly occurring during overlapping periods of time to the same number.

Many people were charged hundreds of dollars on their phone bills for one company's audio entertainment service delivered through return cramming calls.

In many cases no initial call to the service was ever made and even those who did call are generally shocked and surprised to find these unexpected and substantial charges on their telephone bills.

They may even provide a toll-free 800 number on your phone bill, ostensibly for you to call with complaints or questions.

However, when you call this number you find it difficult to reach a representative.

You may reach only a recorded message telling you that if you need to speak to a representative you will have to try back later because all operators are busy.

Or you may be put on hold for long periods of time.

In fact, you could easily spend several hours over a period of several days simply trying to reach a person who can answer questions about the charges on your phone bill.

When you finally succeed in reaching them, they tell you that you are legally responsible for the charges, regardless of who, if anyone, ordered and received the service in question.

In many instances, they initially refuse to credit your account, even though you have neither ordered nor authorized an order for their services.

In some cases, they will issue a credit to you only after the intervention of your phone company or government authority.

Ordering You Around

You receive an e-mail informing you that your order has been received and processed and your credit card will be billed for charges ranging from $250 to $899.

The trouble is, you haven't ordered anything.

The e-mail advises you that if you have questions about your "order" or want to speak to a representative you should call a telephone number in area code 767.

You don't realize that the area code is for Dominica, West Indies, because no country code is required to make the call.

You call expecting to speak to a representative about the erroneous "order" but are connected to an adult entertainment audiotext service with sexual content.

Later, you must endure cramming telephone charges for the international, long-distance call.

Callers to one number are led to believe they are talking to a live person, but in fact it is a clever recording that responds to the caller's voice.

Among other things, an irate-sounding man with a British accent warns, "Your check will come round or we'll come round to get it."

The recording seems designed to keep callers on the line as long as possible, and is reportedly billed at $25 per minute.

Others reported that this "man" with a British accent kept telling them to hold on while he picked up other phone calls and supposedly yelled at his staff.

He continued to yell at the callers as well, saying "send the money," and yelled into other ringing phones as long as the callers remained on the line.

"This scam used low-down tactics and high-tech tools to rob consumers in their own homes," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection.

They contacted people using bulk e-mail —commonly known as spam —using inactive return addresses which prevented you from refuting the orders by e-mail.

Note: A viewer has indicated that this particular scam event is actually an urban myth that never really occurred, except in the mind of the initial storyteller.

Should anyone wish to dispute this claim please write so that it is not unintentionally perpetuated.

continue QuickTour

I Know So Many Girls

You get a call and the operator asks if you would accept a collect call from "Jennifer" (sometimes "John" is used).

If you agree, you then hear a prerecorded message that informs you that you have just made an $8 donation to a nonexistent missing children's charity.

One operation from Mexico calls U.S. residents of Mexican ancestry and asks if they would accept a collect call from a person with a common Spanish first name along with their surname.

Many people accept the calls thinking they are from relatives bearing the names given.

Even though the calls are shortly disconnected as "mistaken" numbers they all incur a minimum $57 charge.

A Recurring Nightmare

Somewhere around 900,000 victims across 22 countries have had over $43 million dollars worth of fraudulent or nonexistent services crammed onto their credit cards at the rate of $20 per month.

The Federal Trade Commission has won a $37.5 million verdict against a group who bought access to lists from a California bank that provided the account numbers for more than three million valid Visa and MasterCard credit cards.

Rather than use the lists to confirm that potential customers had valid cards, the defendants debited the cards for "Web site services" the cardholders had never used.

In effect, they stole and processed Visa and MasterCard numbers from the database such that over 90% of their $49 million a year in "sales" were actually unauthorized charges.

J K Publications (alias Webtel, Netfill, etc.) and their front companies generated about a third of all customer complaints at a major card company in late 1998.

Their merchant accounts had a "chargeback" rate 100 times the national average but each time a merchant account was closed by the credit card companies, they would open a new one.

At one point, they alone, accounted for 4% of all Visa chargebacks.

They used at least five different merchant accounts and four fictitious business names to process the transactions.

The timing of each new merchant account application coincided with the impending threat of being placed on VISA USA's "active monitoring" list for excessive "chargebacks" -- amounts debited to cards but disputed by the consumers who were charged.

According to U. S. District Court Judge Audrey B. Collins, "A shocking 40% to 50% of the "web" charges were taken from people who said they did not have a computer and had not given their card numbers to anyone."

Consumers, many of whom were billed repeatedly over successive months, appealed to their credit card companies for help, but many banks will only go back 60 days and since the total for two months was less than $50, the credit card company was not obligated to refund everything.

People were also told that they could not block future charges to the cards so many finally canceled their credit card accounts as the only way to avoid the charges.

The $37.5 million damages verdict represents the illegal charges minus the amounts that consumers already received through chargebacks and credits.

The FTC has identified in excess of only $20 million in defendant's assets, so it is not clear whether the $37.5 million ordered by the Judge will be available for consumer redress.

One defendant was barred for 10 years from owning, controlling, holding a managerial post, consulting for or serving as an officer in any business that handles consumers' credit or debit card accounts, while another fled to Jamaica soon after he was served with the complaint.

The distributed nature of the Visa/MC system, with each bank managing its own "business", is a weakness in the system.

Visa International does not have access or control to Merchant Account information. Only the banks have that information.

Networked e-commerce allows criminals to test credit card numbers across the merchant account system in high volume.

Using credit card number generation technology they can attack a very large number of victims in a widely distributed manner with small transactions, thereby delaying detection and reducing the incentive for prosecution.

Though it allows credit card numbers to be used without identifiers it also enables this type of fraud.

This has privacy advantages but it would be a lot harder to generate credit card numbers if identifiers were required.

More info on the Netfill Cramming Case

You Actually Save 1.46%

The use of bogus "rebate" checks is often used to deceive consumers into signing up for such ongoing billable services as Internet yellow page directory and Internet services.

YP.Net; Telco Billing, Inc.; Publication Management Inc. and their owners

The FTC alleged that they sent checks for $3.50 marked "REBATE ACCOUNT" to people all over the country but that nothing on the front of the check alerted consumers that, by cashing the check, they were agreeing to purchase an Internet yellow page listing at the rate of $19.95 per month for a year, or that the charge would automatically be placed on their telephone bill.

The FTC charged that because only a notice printed on the inside of the envelope spelled out the terms and conditions of the agreement it was deceptive.

The settlements will not only bar them from using the term "rebate" on solicitation checks in the future but they are now required to clearly and conspicuously disclose the obligations you will incur by cashing such solicitation checks.

They will also be required to send notices to confirm service and billing agreements and to give people the opportunity to cancel.

In addition, they are required to give certain affected consumers the option of a two month refund.

A related company, Simple.Net, along with Simple Access, Inc., Dial Up Services, Inc., and ISP Marketing, Inc. engaged in a similar marketing scheme and are subject to a similar injunction.

Enhanced by Fraud

The FTC, which accused San Antonio Texas-based New Century Equity Holdings Corp. and two of its subsidiaries of "cramming" or hiding unauthorized charges for Web site design and "other enhanced services" on the phone bills of thousands of unsuspecting consumers has settled its complaint.

New Century and its subsidiaries, Billing Concepts Inc. and Enhanced Billing Services Inc., agreed to a settlement of the complaint which alleged that the companies attempted to force consumers to pay for Web site design services and calling cards that the consumers did not ask to receive.

It was noted that New Century and its subsidiaries did not sell the services in question, but rather acted as "billing aggregators," serving as intermediaries between the fraudulent vendors and the phone companies.

As such they provided the portal into the telephone billing system, without which crammers would have no way of placing charges on consumers' phone bills.

The FTC has also filed complaints against several of the crammers who used New Century's services

Under the settlement deal, New Century Equity Holdings agreed to notify consumers who may have been bilked and surrender $350,000 that it and its subsidiaries collected or sought even after complaints from consumers that they did not authorize the charges in question.

A Good Job You Called

Two men have been charged in a cramming scam that bilked 5,600 people out of $120,000 by charging a fee for Chicago city job applications.

Joseph Peters of Chicago and Canio Carl Saluzzi of New York were charged with placing ads with local newspapers that offered "City jobs, now hiring, no experience".

The ad instructed applicants to contact a telephone number at a charge of $19.95 per call.

People who called the number were greeted with a recorded message that instructed them to call a different number.

Those who called the second number were told a list of jobs was available by visiting or calling City Hall, or by checking the city's Web site.

Thousands of residents looking for work were duped into paying for job listings that are free and available to anyone contacting City Hall.

City officials, who were alerted by people who noticed the charges on their telephone bill, had Ameritech shut down the advertised phone line.

Officials said people who called the number should contact Ameritech to dispute the charges.

Uncertain Future In The Cards

02/02 - Miss Cleo, is a familiar face on television advertisements which offer viewers an insight into their lives through free psychic readings or Tarot cards.

"Call me now," she implores in her husky Caribbean accent, as a toll-free number flashes up on the screen.

But to actually speak to the psychic, callers must dial another number that charges $4.99 a minute after the first three minutes.

Federal regulators, who said two Florida-based companies behind the psychic -- Access Resource Services Inc. and Psychic Readers Network -- were reaping huge profits from so-called free readings that on average cost consumers $60, have filed a complaint accusing them of using deceptive television advertisements to scam as much as $360 million from hotline callers.

Sean Moynihan, a lawyer for the two companies, denied the charges even though Howard Beales, head of the FTC's consumer-protection division, said the two firms, previously the target of legal action in nine separate states, were "permeated with fraud."

The federal agency said that while it has received more than 2,000 complaints about Miss Cleo over the past 18 months, they estimate that up to 6 million people might have been affected.

The federal complaint seeks to put a permanent stop to the deceptive advertisements, appoint a receiver to preserve company assets, and freeze the assets of the firms' chiefs, Steven Feder and Peter Stolz.

Tips to help you avoid cramming scams.

Be aware that your local telephone company may bill for services provided by other companies.

Be especially wary if you're told to enter codes, leave your name, or answer "yes" to prompts. Unscrupulous entertainment providers may use this ruse to send you a bill.

All 900 numbers cost money, even if you're calling to claim a "free" prize.

All 900 numbers that cost more than $2 must give you a brief introductory message about the service, the service provider, and the cost of the call.

You have three seconds after the message ends to hang up without being charged.

Consider getting a 900 number block; it stops calls from going through to 900 number services.

Blocks also are available for international, long distance, and local toll calls. Call your phone company for details.

Examine your phone bill for recurring monthly charges. These charges typically appear as "Miscellaneous Charges and Credits."

They may be so small, or described in such general terms, that they're easy to overlook or confuse with valid services you may have ordered from another provider.

Watch for fees described as "Min Use Fee," "Activation," "Member Fee," "Voice Mail," or some similar phrase.

If you find an error on your bill, instructions on your statement will tell you who to call or write to dispute the charge.

Follow up any phone conversations with a letter, sent by certified mail, return receipt requested. Keep a copy for your files.

News Articles on Cramming

Mercury Internet Services, Epixtar Corp, GoInternet Net Inc, SBA Online Inc have all had complaints for cramming offenses.

Up Buying Clubs