Beware Mystery Fees for Web Services
When Geoff Sigg noticed a small charge from an unfamiliar company called Spoonfull.net on his company's SBC Communications phone bill last September, he looked a little closer. He discovered that for two months, he had paid $4.31 including taxes to a company he'd never heard of.
He checked further and found that Spoonfull.net was charging to list his Connecticut jewelry store in its Internet directory. But he couldn't find the listing on Spoonfull.net's site, and he says he never ordered such a service.
Sigg soon learned he isn't alone. Other SBC customers have questioned similar charges. Sigg says a Spoonfull.net representative told him and others who complained that they had ordered the service either online or by telephone. Sigg protested, but the bills came for two more months before the charges finally stopped in December. Sigg says he received refunds for two months, then gave up the fight in frustration.
Florida-based Spoonfull.net is one of four Web services firms operated by the mother-son duo Mary Lou Farr and Willoughby Farr. One or more of the firms have been sued by state attorneys general in Illinois and North Carolina, and two are under investigation in Florida. The scrutiny involves allegations of a practice known as "cramming," in which unauthorized charges--often small and often overlooked amounts--are placed on individual and company phone bills. (It's a cousin to "slamming," in which long-distance carriers are switched without a customer's consent).
Willoughby Farr flatly denies that Spoonfull.net or his other companies engage in cramming.
"We would never knowingly bill someone who never signed up for the service," says Willoughby Farr. Mary Lou Farr refused to comment for this report.
Farr says all of the entries in Spoonfull.net's directory are requested and paid for by companies that ask to be listed. He declined numerous requests to supply names of satisfied customers.
The companies run by the Farrs include Voicenet, Spoonfull.net, Switched Access Communications, and Directory Service. Voicenet advertises a service that lets you call a toll-free number to retrieve e-mail by using text-to-speech technology. Spoonfull.net offers a Web directory and dial-up Internet access service. Switched Access markets long-distance telephone services (its Web site was not available at press time). Directory Service offered national telephone directory assistance before it closed last year, Willoughby Farr says.
Billing of 100,000 Halted
It is a common practice--and perfectly legal--to charge for Internet and telephone-related services via a home or business phone bill when a customer orders and receives products.
Most charges are placed through independent third parties called billing aggregators, which work with telephone companies to place charges on phone bills. When customers pay their bills, the money is routed back through the aggregator (which keeps a percentage) to the company providing the services.
Telephone companies have been required to work with aggregators since AT&T's breakup in 1984, says Allen Hile, assistant director with the Federal Trade Commission's marketing practices division.
Until recently, Spoonfull.net billed for its services through an aggregator called Integretel. On February 20, Integretel terminated its contracts with Spoonfull.net and Voicenet because of an "unacceptable level of consumer complaints and problems," says Ken Dawson, an Integretel spokesperson. Between Spoonfull.net and Voicenet, Integretel billed close to 100,000 customers on the Farr's behalf, Dawson says.
Some customers' March phone bills include lingering charges for Spoonfull.net and Voicenet while Integretel completes the billing cycle, he says. Integretel will issue credit to customers who complain that they were billed in error, Dawson adds.
Integretel quit billing for Directory Service a year ago, also because of "an excess number of complaints," Dawson says.
States Take Action
Willoughby Farr denies that the companies he runs engage in cramming practices. All four of the companies are now fighting such accusations in court.
In March, Illinois Attorney General Lisa Madigan accused both Farrs, Voicenet, and Switched Access of violating Illinois consumer fraud laws. The state's complaint seeks a permanent injunction prohibiting the two companies from conducting their telecommunications business in Illinois or billing Illinois residents for unauthorized charges. It also seeks restitution for consumers, plus civil penalties of $50,000 or more.
The complaint alleges Voicenet has billed an unspecified number of Illinois residents between $3.95 and $6.95 plus taxes monthly for Voicenet service without their consent. The state's lawsuit claims that as of April 2002, Voicenet had caused 9068 charges to be placed on the phone bills of 2527 Illinois residents, to the tune of $35,818. The complaint also notes that Integretel and local telephone carriers have issued only 504 refunds or credits to Illinois consumers, which amounts to 6.9 percent of the billings to Illinois customers that Integretel made on Voicenet's behalf. Spoonfull.net is not named in this complaint.
North Carolina is charging Directory Service and Switched Access with violating the state's Unfair and Deceptive Trade Practices Act. In May 2002, North Carolina Attorney General Roy Cooper alleged cramming on phone bills of North Carolina small businesses, citing 37 examples of customer complaints.
The state believes both firms billed consumers for $1.99 in directory assistance calls they did not place, and $5 to $6 for collect calls they did not accept, says John Bason, a spokesperson for the North Carolina Department of Justice. The suit seeks refunds for consumers and unspecified civil penalties. The questioned charges appeared on phone bills from BellSouth, Sprint, Carolina Telephone & Telegraph, and Central Telephone, Bason says.
The Florida State Attorney General's office confirms it has begun a formal investigation into possible cramming by Spoonfull.net and Voicenet.
The Farrs declined to comment on the various allegations. However, Willoughby Farr says Spoonfull.net and Voicenet have implemented new safeguards in recent months to ensure customers are aware of their billing relationship with the firms. Now, both companies send a service confirmation letter to new customers and e-mail a copy of the monthly invoice to Spoonfull.net customers, Farr says. However, when PCWorld.com signed up for Voicenet service in February, we did not receive a service confirmation letter or a bill.
PCWorld.com spoke with dozens of businesses identified as Spoonfull.net customers on its Web site, and found many were being charged for the firm's services without realizing it.
Melissa Darrow, treasurer of the Atlanta Women's Club, was angered to discover the organization may be a victim of cramming. The group has been charged $4.07 for the past five months for "Internet access services" that Darrow says no one at her organization authorized or requested. "I've never heard of Spoonfull.net," she says.
A partial Web directory listing appears on Spoonfull.net with the name, address, and phone number of the Atlanta Women's Club. The text that accompanies the listing is gibberish that repeatedly reads: "If the inverting-core acceptor deflects the complex." This language is filler text generated by a plug-in to the Macromedia Dreamweaver site-design program, and it is found in dozens of Spoonfull.net directory listings.
"The audacity of these companies--to just stick these charges on my bill," says Paul Pettys, president of the Florida firm Pettys Design. Like all of the business owners willing to talk with PCWorld.com, he was amazed that Spoonfull.net had managed to charge the firm's phone bills without consent.
A representative of Massachusetts retirement home Pulaski Heights says the business was unaware it had been billed by Verizon on behalf of Voicenet since March 2002.
Evaluations of Internet access services offered by Spoonfull.net and the text-to-voice e-mail service from Voicenet raise further questions. Both services repeatedly failed to work over the past three months in which PCWorld.com tried to independently test them.
Since early November, a toll-free number listed on Voicenet's Web site for retrieving e-mail by phone has been mostly inoperable. One customer service phone number was functioning in mid-January, but a recorded message asked callers to leave a message in a voice mailbox that was too full to accept messages. A toll-free customer service number appeared to be disconnected.
After PCWorld.com asked to review Voicenet, the toll-free e-mail retrieval phone number became operational on January 17. Using a Voicenet house account, we successfully retrieved e-mail messages and heard them read them back using text-to-speech technology. However, when in the same timeframe PCWorld.com tried to test the service independently--as a consumer user rather than as a media reviewer with a house account--we failed to obtain service at all. In addition, Voicenet sent no confirmation for the independent order. The Voicenet e-mail retrieval number has offered a "no longer in service" message most of the time over the past few months.
Spoonfull.net's dial-up Internet access number has consistently not worked since PCWorld.com first tried testing it in early November. Repeated attempts to reach its service failed--we checked at least once each week for months. After PCWorld.com inquired, on January 17 Spoonfull.net posted a message stating dial-up service was "temporarily unavailable" and would be restored on January 20; however, it has remained inoperative when tested at least weekly since then.
Willoughby Farr blames network "stress" on company computer systems for technical problems with Voicenet and Spoonfull.net. When asked to explain patterns of people denying signing up for his service, he insists that someone at the home or business billed agreed to the service.
Spoonfull.net previously worked with billing aggregator ILD Telecommunications, which passed the Spoonfull.net charges to telephone companies. After three months, ILD "abruptly" terminated its relationship with Spoonfull.net and Voicenet, says Fred Lloyd, ILD senior vice president. Lloyd wouldn't comment on why. In November, Spoonfull.net and Voicenet began working with billing aggregator Integretel. That relationship also lasted only a few months.
Now that Integretel is no longer acting as a billing integrator for Spoonfull.net, the firm may need to find another way of getting the company's charges onto phone bills.
The other partner in this business scenario--the telephone company--walks a fine line. Many major telcos report a jump in customer complaints claiming phantom tack-on Internet services such as Web sites, e-mail boxes, and Net access. BellSouth and SBC say they've experienced a significant increase; Qwest and Verizon also report a spike in cramming complaints.
"We are required by law to work with these third-party billing agents," says Beverly Levy, an SBC representative.
However, telephone companies can cut off the relationships under some circumstances. For example, SBC last year stopped accepting Spoonfull.net charges from Integretel in Connecticut, citing an unspecified but excessive number of complaints.
BellSouth has implemented guidelines when dealing with aggregators, says Stephanie Landry, BellSouth director of billings and collections. For charges to appear on BellSouth statements, billing firms must be able to provide on request a voice recording or written or electronic authorization from customers approving the charges, Landry says.
Each telephone company has different requirements for billing aggregators, says Jacquelene Mitchell, who chairs the Coalition to Ensure Responsible Billing, a trade association of billing aggregators. Mitchell says billing agents must adhere to telephone company requirements.
BellSouth's Scott says billing aggregators share the responsibility of making sure customers authorize the service fees, since it's the aggregator who deals with the Web service firms. But the problem of cramming remains.
"The bottom line? Always, always check your phone bill," says SBC's Levy.
Despite the phone companies' increased diligence, telcos say customers are responsible for reviewing their phone bills just as they review their credit card statements. Here are some tips to avoid being crammed:
- Check your monthly phone bill for mystery charges. Scrutinize the "Miscellaneous Charges and Credits" section for small obscure charges.
- Be wary of salespeople who call to offer a "free" service, such as a no-cost Web site or Internet yellow pages listing.
- Formally ask your phone company to ban third-party billing on your account. For example, BellSouth, SBC, and Verizon allow customers to block third-party billing unless expressly permitted.
- Carefully read all service offers, especially for phone and Internet services.
- You may want to check out an offer, but be judicious in calling the toll-free numbers for services you're not familiar with. Such calls can often give your phone number to the party you're calling, which may enable them to put unwanted charges onto your phone bill.
- Report suspected cramming to your phone company and to federal and state authorities as well as to consumer advocacy groups.