When Candace Hadley got a telemarketing call from Mercury Internet Services, she didn’t find the pitch especially enticing, but the price was right.
For no charge, the company said, it would make a demo Web page for Hadley’s small advertising and marketing firm, Hadley & Associates in suburban Washington. She could then review the page and decide whether to buy from Mercury.
Hadley designs her own Web sites, so she wasn’t interested in paying others to make one for her. But she was curious, and because the company didn’t have her credit card information, Hadley figured it couldn’t hurt to take a look.
It wasn’t until a year later–long after she had tossed the demo page the company sent her–that Hadley noticed Mercury’s name buried in her 13-page-long monthly phone bill, accompanied by a charge for $29.95. Next to the Mercury charge was another $29.95 hit from a company she’d never heard of, a subsidiary of Epixtar Corp. Old phone bills yielded even more evidence of charges she said she had never authorized. The grand total for the year: $520.85.
Hadley believes she was “crammed”–her telephone bill riddled with charges for services she had never requested. She wondered why her phone company, Verizon Communications Inc., would allow such a thing.
“I was furious. I was really, really angry. First of all, I was pretty mad at myself,” said Hadley, who prevailed on Verizon to refund the payments. “Then I got angry at these companies that have this incredible power to do this. And then, the more I thought about it, the more angry I got with the telephone company.”
In the past six months, the Federal Trade Commission has taken legal action in federal court against the two companies that Hadley believes were bilking her. Yet Verizon continues to allow both companies to charge customers through their phone bills. Epixtar denied wrongdoing; repeated phone messages left at GoInternet.Net Inc., the name under which Mercury now operates, went unreturned.
Paul Glover, Verizon’s product manager for billing services, said decisions to stop billing for vendors are based primarily on the number of complaints the company receives internally, not on findings by the FTC. He also said the company has a generous policy of offering refunds to customers who believe they’ve been wrongfully charged. “We assume that the customer reads the bill. When I get my bill, I read it.”
Local phone carriers routinely provide billing services for thousands of companies, the vast majority of them legitimate. None of the major phone companies would release exact rates or revenue, but industry officials said the regional telecom giants each earn tens of millions of dollars annually through third-party billing.
Abuses of the system have flared at times. In 1998, the National Fraud Information Center ranked cramming as the most common kind of telemarketing fraud. Complaints have dropped in recent years, however, as customer awareness increased and regulators cracked down on scams.
Now, experts are concerned about a possible resurgence of the problem, with small businesses increasingly locked in crammers’ cross hairs. There are two reasons why: The do-not-call rule has put many residential customers off limits for telemarketers, a luxury not afforded to businesses. Plus, the increasing complexity of many companies’ phone bills has made it harder to detect illegitimate charges amid dozens of pages of taxes, surcharges, special features, miscellaneous items and Internet accounts.
“With businesses especially, there’s an even greater likelihood of slipping something by,” said Susan Grant, the National Fraud Information Center’s director.
For its case against Mercury, the FTC conducted a survey of 417 businesses billed by Mercury and found that only one recalled hiring the company, none believed that Mercury had provided services and 72 percent were unaware that Mercury was charging $29.95 per month through their phone bills.
Mercury settled similar cramming allegations brought by the FTC in 2001, and the FTC says the company has violated that settlement.
Mercury took in $56 million in revenue in 2002, and it has billed 356,000 small businesses for its Web-related services over the past several years, according to the FTC.
Despite the FTC’s allegations, Verizon, the nation’s largest phone company, continues to bill for both Epixtar and Mercury. Hadley, for example, continued to rack up charges on her Verizon bill for several months after the FTC announced in August that it had taken action against Mercury.
A spokesman for the nation’s second-largest local carrier, SBC Communications Inc., said the company stopped billing for Epixtar and Mercury in February, before the FTC filed its charges.
Verizon spokesman Mark Marchand said the company cut off billing for about 30 vendors in the late 1990s, when cramming was rampant. But he said Verizon has not taken that step for any company since early 2000 and has instead relied on warnings to companies against which unusually high numbers of complaints were lodged.
