Mystery Cell Phone Charges

Cell phone companies and third-party vendors, eager to pry more money from subscribers' wallets, are marketing extra services like ringtones, games, music, and more. But an increasingly angry chorus of cell phone customers complain that they're getting mysterious bills for monthly services that they did not intend to sign up for, and that then take months to cancel.

Customers are also upset about paying for spam text messages to their phones. And lawsuits and consumer groups are targeting the huge early termination fees most companies charge and the seeming myriad of taxes that can make up as much as a fifth of monthly phone bills.

Dorothea Cole, of Davenport, Iowa, discovered a monthly $34 charge she didn't recognize on one of her company's Sprint wireless phone bills.
Photograph: Ralf-Finn Hestoft
Perhaps the most frustrating of the problems are the mysterious bills for extra services. Take the case of real estate agent Dorothea Cole, of Davenport, Iowa. Last spring, she discovered a monthly $34 charge she didn't recognize on one of her firm's Sprint wireless phone bills. The carrier said the charge was from a third-party service, not Sprint. But the support reps said they were unable to identify the the charge. The phone had been used by a former employee who was no longer reachable, so it was up to Cole to figure out how to stop this recurring charge.

When she asked Sprint to stop the billing, it refused and told her to contact the company herself. But since Sprint had said it couldn't name the company, Cole was stuck. She says her bill indicated only that the charge was for a "Premium Services Non-Telecom Purchase."

Charge (Finally) Goes Away

Cole turned off the phone's voice and data service, but the account remained active, and charges reappeared. For seven months she asked Sprint--to no avail--for information on who was billing her each month and how to stop the charge. In December, Sprint finally told Cole the charge came from a company called Blinko. Blinko, an American subsidiary of Italy's Buongiorno entertainment conglomerate, offers ringtones, games, SMS jokes, and wallpapers to cellular customers.

When Cole called Blinko, the company initially declined to issue a refund, explaining that while she paid the bill, she wasn't the one who signed up for the service. She told Blinko the phone had been deactivated for the past seven months. In the end, Blinko agreed to refund her $70.

Blinko told PC World that it grants full refunds to customers who allege that somebody else had used their phone number to sign up for a Blinko service.

When we followed up with Cole, she said she had finally received a letter confirming cancellation of the service. Sprint had also agreed to refund her $151.75.

Sprint can't explain how this happened to Cole. Sprint says it refunds disputed third-party charges, and that the billing party is supposed to be identified on account statements, especially after a recent update to its billing system. Sprint spokesperson Roni Singleton says the company is investigating Cole's case. "Something clearly went wrong here," Singleton says.

Where Did It Come From? (Case No. 2)

Glenn McDonald, a Rosedale, Maryland, software engineer who uses Verizon Wireless, had a similar problem. He says he spotted a $10 charge on his September bill that he couldn't identify. He suspected it was something his teenage son may have signed up for when he tried to download a ringtone, though his son couldn't confirm that. In any case, what McDonald ended up with was weekly trivia questions sent via text messages to his phone.

Verizon initially told him it didn't know who was responsible for the charge, then later said it was Blinko. McDonald called Blinko and, after multiple tries on its automated phone system, eventually got hold of a customer service rep who agreed to cancel the account. However, a similar charge showed up in December, McDonald says, and Verizon told him the charge had all along been from MobileSidewalk, which also delivers games, videos, ringtones, and the like to cellular users. Verizon told him it would credit him $10 for the error. McDonald then called MobileSidewalk and cancelled the account.

Verizon says that it does not discuss specific customer issues, citing its privacy policy.

Broad Problem

Cole and McDonald are two of many cellular customers that shared with PC World near-identical stories of recurring mystery fees on their bills, along with similar hassles in stopping the charges. The Better Business Bureau and multiple state attorneys general have received thousands of complaints about Blinko, many alleging similar mysterious charges and difficulty getting rid of them.

For example, Blinko is facing a class action lawsuit in Michigan over sending Verizon Wireless customers in that state "unwanted text messages and monthly charges." The Florida attorney general is investigating similar claims against Blinko, according to public records. Mobile game and ringtone provider M-Qube, a subsidiary of telecommunications and security services company VeriSign, faces a similar class action suit in Massachusetts. VeriSign declined to comment.

Verizon Wireless and AT&T (formerly Cingular) are also contending with customer lawsuits. The suits allege that customers were billed monthly without consent for a "Roadside Assistance" program for over two years (for more on these suits, read "Why We Love to Hate Our Cell Phone Company").

Mergers to Blame?

Merger mania has done much to improve wireless reliability, says Serge Matta, an analyst with ComScore Networks--but, he adds, it's made companies' billing systems worse. Merged companies have to cobble together the billing systems of the entities that are involved in the merger. The end result, Matta contends, is bungled bills.

The new AT&T, for example, is made up of Cingular, AT&T Wireless, BellSouth, SBC, Southwestern Bell, and Ameritech. "Merging those billing systems has been a nightmare for companies," Matta says.

Even companies that aren't dealing with a merger may have problems, since many systems are antiquated and weren't designed to cope with the many new products and services you can now purchase via a cell phone, says Elisabeth Rainge, director of telecom software research for IDC. The Cellular Telecommunications Industry Association, a trade group, acknowledges that "there is work to be done" when it comes to billing for third-party services.

The CTIA is developing a system to monitor third-party services and root out the Bad apples, says Joe Farren, a spokesperson for the association; but Farren could give no time frame for the completion of this monitoring system.

Aggravation Watch

Other charges that have consumers fuming are the fees related to unwanted text messages or SMS (Short Message Service) messages. The problem has quickly come to a head for consumers as advertisers test the limits of mobile marketing with unsolicited messages that users are charged for. Depending on the cell plan, users pay either a set fee for each message that is sent or received, or a flat rate for a set number of messages. Worse, you typically cannot avoid unsolicited text messages unless you configure your service to block all SMS messages, according to the Federal Trade Commission.

Florida-based C & C Global Enterprises got hit with a lawsuit by Illinois Attorney General Lisa Madigan after it allegedly sent millions of unsolicited text messages to Illinois wireless phones last November. Madigan says its Consumer Protection Division has 256 complaints from consumers saying they received these unsolicited text messages from C & C Global. Messages sent to cell phones told users that "We have someone interested in buying or renting your Time Share" and directed them to log on to www.webuyresorts.com or www.resortsellers.com for more information (these URLs are not currently working). The Illinois lawsuit alleges that these messages violate the federal Telephone Consumer Protection Act (TCPA) and the state Consumer Fraud and Deceptive Business Practices Act.

C & C did not reply to e-mail sent to an address listed under the company's domain name registration, and did not answer its phones.

An Arizona court ruled in 2005 that the TCPA, which prohibits unsolicited phone calls to cell phones, also applies to SMS or text messaging. The defendant in the case, a mortgage firm by the name of Acacia, tried to appeal to the U.S. Supreme Court, but the appeal was rejected this year, so the Arizona ruling stands. It applies, however, only to mass e-mailings delivered to cell phones as SMS messages; customers remain unprotected if an individual uses a cell phone to send spammy text messages, say sources at the FTC familiar with the case.

The Mobile Marketing Association, an industry trade group, has recently developed guidelines for strictly policing text messaging ads, such as a double opt-in requirement where you must confirm your subscription. Marketers must now agree to abide by these MMA guidelines to gain access to carriers' customers. (See "Is That a Sales Pitch in Your Pocket?" Consumer Watch, January, for more.)

Fee and Reception Frustrations

The American Association of Retired Persons and other consumer groups want to get more information from carriers about another often mysterious portion of cell phone bills: the taxes and user fees levied by local, state, and federal agencies. These taxes average 14 percent of a cell phone bill, according to the CTIA, and can be as high as 21 percent in states like Nebraska.

Such taxes and fees are often not factored in when wireless plans are marketed to the public, says Bill Ferris, a lobbyist for the AARP. For that reason, the AARP is fighting to allow cell phone customers to cancel their contract 15 days after receiving their first bill without getting hit with an early termination fee. The CTIA argues that early termination fees, which can be as high as $250, ultimately keep the price of wireless service and handsets low because they go toward helping companies recoup the cost of customer acquisitions, the administrative costs for creating and cancelling accounts, the cost of handsets, and so on.

These contracts have one simple purpose: to make it prohibitively expensive to dump a bad wireless service, counters Ben Schwartzman, an attorney with the Boise, Idaho, firm Greener, Banducci, Shoemaker. The firm is suing T-Mobile over the company's early contract-termination fees. Schwartzman says his firm decided to sue T-Mobile when several of the firm's attorneys discovered they couldn't get service on their new T-Mobile phones in remote parts of Idaho where they did business. The lawsuit, filed in an Idaho U.S. District Court, claims the $200 flat fee that T-Mobile charges when customers cancel service before the end of a contract violates consumer protection laws in 13 states. A T-Mobile spokesperson declined to comment, saying the company does not talk about pending litigation.

Solutions in Sight?

Some consumer advocacy organizations, such as the U.S. Public Interest Research Group, are turning to government for a solution. U.S. PIRG has been lobbying for truth-in-billing legislation, and its efforts, along with those of similar groups, are paying off as legislative proposals appear in several states around the country.

At least three states are currently dealing with wireless billing issues. California lawmakers have been pushing a Telecommunication Consumer Bill of Rights. Minnesota legislators are considering a statute establishing consumer protection for cell phone users. Similar efforts are under way in New York where the AARP is backing legislation forcing cell phone companies to make bills easier to understand and allow customers to cancel service contracts without penalties.

Wireless carriers oppose state-level regulations. They would prefer to have a single federal agency, such as the Federal Communications Commission, set national standards. "Complying with disparate regulatory regimes will only increase customer costs and slow innovation," CTIA president and CEO Steve Largent said in a statement.

At this writing in early 2007, none of the proposed consumer protection laws for cell phone users have yet been passed.

Dump Your Cell Phone Company

Illustration: Hal Mayforth
Illustration: Hal Mayforth
Unhappy with your wireless provider? You don't always have to pay hefty fees to break free from your contract. For a nominal one-time charge ranging from $15 to $20, some sites offer you a service that lets you jettison your unwanted contract or swap it with another user for a service you prefer.

Two such sites, CelltradeUSA.com and Resellular.com, have been around for about a year; newcomer Cellswapper.com launched in January. These sites create an online venue through which people who want to buy, sell, or swap a cell phone contract can meet and negotiate. If you want to transfer your account, however, you must call your carrier and make the request to transfer your phone and contract to someone else. Carriers go along because, although they lose one customer, they get another, and the contract is ultimately honored. "We look at it as an opportunity to win over a new customer," says Roni Singleton, the Sprint spokesperson.

Cellswapper.com co-founder Adam Korbl says that there are about 260 wireless contracts for sale on an average day at his site, and that about 100 contracts are purchased each week. Users who want to make their sale quickly tend to sweeten the deal by throwing in the old phone or by offering a cash incentive. If the seller doesn't include the old phone in the exchange, buyers must purchase their own to match the new service, with no carrier subsidy. Still, sellers and swappers tend to come out ahead since their final costs are often far below the termination fees, which can be as high as $250.

If you're looking for another escape route, pay close attention to the fine print in any contract updates your carrier sends you. For example, in January, Verizon offered some of its customers an opportunity to quit their cell plans and pay no termination fees because it raised the rates on its text message service, thereby changing the terms of the contract.

For comprehensive coverage of the Android ecosystem, visit Greenbot.com.

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