Phone bill 'cramming' targeted

It was a $17.32 charge from an outfit called Cheap2Dial. Neither Marilyn nor her husband, Victor Gebauer, had ever heard of it.

Victor, a 72-year-old Lutheran pastor, called Cheap2Dial, and its representative claimed Marilyn signed up via the Internet. But the signup information had an e-mail address Marilyn has never used and listed her date of birth in 1974, putting her in her mid-30s.

Marilyn is 69.

Victor was doubly incensed. "They even added a billing fee -- they charged us a fee to bill us!" he exclaimed.

The Gebauers had been "crammed" -- they were among more than 2,500 other Minnesotans who had charges worth $179,000 placed on their phone bills in small, almost unnoticeable amounts, for long-distance service they didn't order or use, according to Minnesota Attorney General Lori Swanson.

The attorney general filed a lawsuit in Hennepin County District Court on Friday charging Harrisburg, Pa.-based Cheap2Dial with fraud and asking that it be stopped from operating in Minnesota and make restitution to its victims.

Cheap2Dial did not respond Friday to a phone message, a faxed question and an e-mail request for comment.

Swanson was joined at a news conference Friday by Sen. Amy Klobuchar, D-Minn., who sits on the Senate Commerce Committee. It is investigating a surge in cramming complaints nationwide and could suggest legislation to try to make phone companies pay up for fraudulent fees charged to their customers.

Cramming complaints to the Federal Communications Commission increased nearly threefold from 2005 to 2009, when it received 6,714, according to Swanson's office.

The FCC could not confirm those exact numbers but its chief of consumer and governmental affairs, Joel Gurin, said his office has seen an increase. More than 2,100 people filed complaints to the FCC in the first three months of 2010, according to his office.

The Minnesota case may be larger than it appears because many people don't check their phone bills as carefully as the Gebauers. The actual damage could be in the tens of millions of dollars nationwide, Swanson said.

The Federal Trade Commission last September helped shut down an operation called Inc21 and got a court order for $38 million in restitution.

In another case, a Florida man pleaded guilty last year to mail fraud for running a cramming scheme that reaped $35 million between 2003 and 2005 -- while he was in jail.

The practice of cramming dates back to the 1990s, when phone companies let third-party businesses tack their bills for everything from long distance to e-mail service on a regular phone bill.

Chased by a flurry of fraud complaints, the scam artists shifted their focus to wireless customers, prompting more howls from stung consumers. Then the practice went into remission.

But now it's back, Swanson said.

"Cramming works because people don't know their phone bills can be used like a credit card these days," she said at the news conference.

The scam depends upon most people not scrutinizing their phone bills carefully and not being able to understand what's on them, Swanson said.

The rising usage of automatic payments isn't helping, she said. A lot of those customers should scrutinize their phone statements as carefully as their credit card statements, Swanson said.

Greg Carlson, 48, of Eagan, wishes he had.

"We got scammed because we're on auto-pay, just living our lives, and we weren't looking at our bills every month," he said.

The bills are dense, long and hard to read. Scam artists make up company names and charges that sound legitimate, Swanson said.

She also blamed the rise of middlemen called "billing aggregators" who help third-party businesses put their charges on the bills of the phone companies' customers.

"It works because the phone companies have these relationships with the billing companies," she said.

Klobuchar agreed and issued a warning.

"The phone companies need to crack down on the crooks," she said.

Klobuchar's committee expects to wrap up its investigation in the spring, and she hopes to co-author a bill that makes phone companies liable for fraudulent charges.

The bill would be modeled after a 2004 Minnesota law that requires phone companies to reimburse some cramming charges, Klobuchar said.

Qwest Communications International aggressively investigates cramming complaints, and it has terminated the contracts of third-party billers that violate the rules, Qwest spokeswoman Joanna Hjelmeland said.

Qwest, the dominant phone company in Minnesota, also allows customers to block third-party billing from their bills, and she encouraged customers who are worried about cramming to take advantage of that service.

Qwest will be looking into the allegations against Cheap2Dial, Hjelmeland said.

But for Marilyn Gebauer, the damage is done.

"What it does is it erodes our trust in our business partner, which is Qwest," she said. "We're just wary. Very wary."