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Bill aims to prevent unauthorized phone charges

Posted: February 3, 2012 - 2:37am

Senators from across the state have signed on to a bill written to offer protection to Alaska telecommunications customers from unauthorized third party charges on their phone bills.

Called “cramming,” unscrupulous operations can add charges to the phone bills of consumers either fraudulently or through abusive marketing techniques. The charges may be small, but unnoticed they add up. Only one in 20 victims of cramming are aware they are being cheated.

Addressing the cramming issue, Senate Bill 138 had its first hearing in Senate Labor and Commerce Committee on Thursday. Bill co-sponsor Sen. Bill Wielechowski, D-Anchorage, and his staff presented the bill to the committee. Sen. Dennis Egan, D-Juneau, is another co-sponsor.

“Many people don’t know about this,” Wielechowski said, “I didn’t know about this until it was brought to my attention.

“This is a multi-billion dollar industry that harms small businesses, it harms governments, it harms individuals. This is a consumer protection bill to try to protect people from unauthorized cramming of charges on their telephone bills.”

The bill lets customers know where the charges come from and where customers’ payments go. It also lets customers prevent unauthorized charges by only allowing charges through express authorization.

The industry for unauthorized charges is large, Wielechowski said.

“There are billions of dollars slushing around in this industry,” Wielechowski said. However, he said the bill is not meant to harm legitimate third-party billing companies.

The process that determines phone charges is complex and can make disputes difficult, he said. One company can have hundreds of front companies to throw off victims.

Victims of the fraud have spent hundreds of thousands of dollars to get the fraudulent charges removed. It results in loss of time and money, he said.

It’s not currently as big a problem in Alaska as in the nation as a whole, so the bill is more of a preventive measure, Wielechowski said. But, he said, it is probably happening in Alaska.

“People should go home after the hearing and check their phone bills,” Wielechowski said.

The Association for the Advancement of Retired Persons supports the bill. AARP Coordinator Marie Darlin said consumer protection is an issue with which her organization takes particular concern.

A lot of the fraud is “directed toward seniors and retirees,” Darlin said. “After hearing all this I’m going home to check (my phone bill).”

Darlin said there are so many scams going around and new scams all the time. “They keep mounting up,” Darlin said, “so getting ahead of this is a good idea.”

Norman Phipps, CEO of Billings Services Group called in to testify against the bill. He said the bill could threaten small businesses, that third-party billing entities should be allowed to police their own services for crammers.

While Phipps agreed the industry has its share of unscrupulous actors, he said he would prefer his industry adopt proven best practices to protect its customers instead of doing so through legislation.

Third-party billing companies have not shown they are willing or able to police themselves through voluntary action, Wielechowski said. He said the federal government already suggested the industry adopt best practices.

“And unfortunately that has not worked,” Wielechowski said. “If industry can’t solve this problem on their own, we can step in to do that.”

Matt Wallace of the Alaska Public Interest Research Group said his organization roots out the “tricks, traps and hidden fees in the market place.” He said often, fraudulent third-party charges are often poorly disclosed and often are for services that arguably don’t give any value to the consumer.

Vermont, New York, Virginia and Minnesota have already adopted similar legislation.

• Contact reporter Russell Stigall at 523-2276 or at russell.stigall@juneauempire.com

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