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Minnesota attorney general sues telephone bill 'crammer'

Minnesota Attorney General Lori Swanson has filed a lawsuit against a Pennsylvania-based company that placed charges of over $15 per month for long distance calling minutes on the phone bills of unsuspecting Minnesota residents without their authorization.

The practice by which third party vendors put unauthorized charges on a person's phone bill is known as "cramming."

"The company slipped unauthorized charges onto people's phone bills. Cramming works because most people don't realize that their phone bill can be used like a credit card. Because phone bills are long and hard to read, people don't always catch unauthorized charges," said Attorney General Swanson.

Cramming complaints are on the rise nationwide. The Federal Trade Commission recently called cramming "a significant area of recent consumer complaint," and the Federal Communication Commission (FCC) recently said, "It's a problem that's on the increase right now."

The FCC reported receiving 6,714 cramming complaints in 2009, up from 1,761 in 2005. Cramming scams were common in the 1990s but eventually receded following a wave of federal and state crackdowns. They are now on the uptick again due to several factors, including the hard-to-read nature of consumer phone bills; the rise of so-called "billing aggregators" that facilitate the posting of charges; and phone companies themselves, which make money by allowing third parties to put charges on customers' phone bills.

In October, 2009 Attorney General Swanson asked the FCC to promulgate new rules to curb cramming practices, and last week she shared the results of her investigation with the FCC.

Senator Amy Klobuchar, who joined Attorney General Swanson at her announcement of the lawsuit, said that the U.S. Senate Commerce Committee is actively investigating phone companies for their role in telephone cramming. In November, Senator Klobuchar called on the FCC to take steps to crack down on the practice.

"New technology offers more convenience for consumers, but it also offers crooks new opportunities, such as cramming," said Klobuchar. "We need to do more to crack down on this fraudulent practice and prosecute those who engage in it. I commend Attorney General Swanson's work in this area and I will continue to work with her and other federal and state enforcement officials to protect consumers from these scams."

Lawsuit Against Cheap2Dial. Attorney General Swanson's lawsuit against Cheap2Dial Telephone, LLC ("Cheap2Dial") alleges that the company placed charges of over $15 for "dial around" long distance calling minutes on the phone bills of Minnesota residents without their authorization. "Dial around" long distance calling minutes are similar to using a calling card to make long distance calls, minus the actual calling card.

Of the 2,567 Minnesota customers who Cheap2Dial billed since 2008, only nine people (0.35 percent) actually used the company's services to make a long distance call.

When the Attorney General's Office asked Cheap2Dial to produce verification that consumers knowingly signed up for the company's services, the company supplied the wrong information for many consumers, including incorrect names, emails, and birthdates.

Cheap2Dial's monthly fees ranged from $13.97 per month (for 358 calling minutes) to $14.97 per month (for 383 calling minutes), plus fees and taxes that push the total monthly charges to over $17.

The lawsuit was filed in Hennepin County District Court and seeks injunctive relief, restitution, and civil penalties.

Swanson said that cramming works because most people don't realize that their telephone bill can essentially be used like a credit card - with third party vendors placing charges for unrelated services or merchandise on the phone bill. In addition, the monthly charges are often priced at $20 or less per month, and thereby escape detection on people's phone bills. In addition, the attorney general noted that phone companies make money by allowing third party vendors to place charges on customers' monthly phone bills.

"Phone companies make money by letting third parties place charges on people's phone bills, but consumers who are victims of cramming lose money," said Attorney General Swanson.