Mystery Cell Phone Charges

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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 or 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.

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