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.