Overview of the Cramming Problem

T-RCED-00-28: Published: Oct 25, 1999. Publicly Released: Oct 25, 1999.

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Judy A. England Joseph
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Pursuant to a congressional request, GAO discussed Internet-related cramming, which is the inclusion of unauthorized, misleading, or deceptive charges on a consumer's telephone bill, focusing on: (1) the extent of cramming complaints; (2) state and federal regulatory initiatives to protect consumers from cramming; and (3) state and federal enforcement actions against companies engaged in cramming.

GAO noted that: (1) although there is no central source for the number of confirmed cramming cases nationwide, GAO was able to gather information on consumers' complaints about cramming from state and federal regulators and major regional telephone companies; (2) overall, GAO found that consumers' complaints to state authorities about cramming rose dramatically from about 850 in 1996 to nearly 20,000 in 1998; (3) while only 3 states reported receiving cramming complaints in 1996, the total increased to 36 states by 1998; (4) at the federal level, cramming complaints became the fourth most common type of written complaint received by the Federal Communications Commission (FCC) and the second most common type of complaint received by the Federal Trade Commission (FTC) during 1998; (5) both state and federal agencies are taking steps to protect consumers from cramming; (6) most state public utilities commissions told GAO that they provide consumers with information on ways to prevent cramming and have administrative procedures for resolving complaints about telephone billing; (7) at the federal level, FCC has developed consumer information about cramming and streamlined the process by which consumers can file complaints; (8) FCC adopted a new order in April 1999 requiring telephone companies to format their bills so that consumers can more easily identify any unauthorized charges; (9) key parts of this order are scheduled to become effective April 1, 2000, though some outstanding issues raised by members of the industry have not been resolved; (10) FTC also provides information to consumers about cramming and takes their complaints; (11) in October 1998, FTC proposed new rules for combatting cramming that, among other things, would require a consumer's express authorization before charges other than for local or long-distance calling could be placed on the consumer's telephone bill and would allow the consumer to dispute any unauthorized charges; (12) public utilities commissions and attorneys general in 16 states reported to GAO that from 1996 through 1998, they completed 25 enforcement actions against companies or individuals for cramming violations, resulting in over $3.5 million in penalties and customer restitution; (13) FCC and FTC are also working with the states and telecommunications industry to curb this abuse; and (14) FTC has sponsored public workshops with telecommunications representatives, consumer groups, FCC officials, the National Association of Attorneys General, and others to address cramming and provide additional consumer education.

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