Mystery Web Fees Hit Phone Bills

After Cornelia Fleming rebuffed a phone pitch for Web services, she thought she'd dodged a bullet. The telemarketer wanted to give her family business a free trial of an online directory listing, Internet access, and a two-page Web site from National Online Services. Fleming says that she agreed only to accept a mailing about the services.

"I've been burned by offers like these before," Fleming says. Now she feels burned again. While she says that she did not receive the promised information, Massachusetts-based Fleming's Furniture was twice charged $32 on its Verizon telephone bill by Hold Billing Services, a billing agent for National Online Services, for an Internet directory listing, a two-page Web site at True Yellow Pages, and Internet access.

Fleming is not alone. Hundreds of small businesses around the country complain of being charged on phone bills for unordered services. Law enforcement officers call it cramming, which means that unauthorized charges are crammed onto a phone bill. (It's a cousin to slamming, wherein long-distance carriers are switched without customer consent.)

Sometimes firms charge for Internet services without even pitching customers, say state lawmakers and consumers. Connecticut jeweler Geoff Sigg claims that this was his experience. He noticed a small charge from a company called Spoonfull.net on his SBC Communications phone bill last September. For two months, he had paid $4.31 plus taxes monthly to a company he had never heard of.

He discovered Spoonfull.net was billing him to list his store in its Internet directory. But when he tried to access his directory listing, he says, it couldn't be found.

"No sales call, no actual directory listing," says Sigg.

Representatives of Spoonfull.net and National Online Services, both based in Florida, insist they never bill without customer consent. Nonetheless, the business practices of both companies are under scrutiny by several state attorneys general and regulators.

Spoonfull.net is one of four Web services firms operated by the mother-son duo of 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.

"We would never knowingly bill someone who never signed up for the service," says Willoughby Farr. Mary Lou Farr refused to comment for this story.

The Missouri attorney general has sued National Online Services and its parent firm Epixtar, charging they placed unauthorized fees on Missouri residents' phone bills. The state cites nearly 70 complaints of unwanted fees.

Sigg says he was billed for a third month before the charges stopped. He got refunds for two of the months, and gave up the fight in frustration. National has promised Fleming's Furniture full credit; at press time, Fleming's phone bill had not yet arrived.

Since AT&T's breakup in 1984, telephone companies (telcos) must work with third-party billing agents. Some ISPs and Web service providers work through these independent third parties, called billing aggregators, which deal with the telcos to place charges on phone bills. Once customers pay their bills, the money is routed back through the aggregator (who keeps a cut) to the company that is providing the services.

Gripes Rise

Major telcos report a jump in customer complaints of phantom tack-on Internet services, such as Web sites, e-mail in-boxes, and Net access.

Telcos sometimes take action. BellSouth has implemented guidelines to handle aggregators, says Stephanie Landry, director of billings and collections. Billing firms must provide on request a voice recording or a written or electronic authorization from customers approving charges, Landry says.

SBC says it stopped accepting Spoonfull.net charges from its billing agent, Integretel, last year, citing customer complaints.

Representatives of Spoonfull.net and Epixtar say they are unjustly accused of cramming and are fighting the allegations in several courts.

In March, Illinois Attorney General Lisa Madigan accused both Farrs and two of the companies that they run, Voicenet and Switched Access, of violating Illinois consumer fraud laws. The complaint alleges Voicenet billed an unspecified number of Illinois residents up to $7 plus taxes monthly for service without customer consent.

A similar case, alleging unauthorized billing of directory service and collect-call phone charges, is pending in North Carolina against Farr-run Switched Access and Directory Access. The Florida 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 allegations.

Missouri Attorney General Jay Nixon filed suit in January against National Online Services, its sibling Liberty Online Services, and parent Epixtar, accusing each company of violating the state's Merchandising Act by charging consumers for unordered services. Iowa's Office of Consumer Advocate is pursuing separate cases against National and Liberty for cramming.

Sheldon Lustigman, an attorney representing Epixtar, denies the cramming allegations. Typically, consumers forget to cancel their service after a free trial period has expired, he says. "Customers have to call and cancel to avoid charges," Lustigman says.

The investigations aren't limited to Iowa and Missouri. Epixtar's 2002 annual report filed with the U.S. Securities and Exchange Commission acknowledges other inquiries "as well as formal proceedings" in several states. Florida's attorney general is also investigating Epixtar.

Despite the phone companies' increased diligence, the telcos say customers are responsible for reviewing their phone bills, just as they are for their credit card statements.

"The bottom line? Always, always check your phone bill," advises Beverly Levy, a spokesperson for SBC.