Feds warn of cram scam
October 27, 1999
by Keith Perine
(IDG) -- The First Baptist Church of Mexico, Miss., is pretty proud of its Web site, which, along with a liberal sprinkling of crosses, features links for visitors to submit prayer requests or to "meet Jesus."
But two weeks ago David Pickering, the designer of the church's elaborate site, was told by staff members of the Senate Committee on Small Business that First Baptist had not one, but two Web sites. The second was a shoddy, one-page affair displaying little more than some bullet points and a piece of clip art.
Pickering quickly discovered that his church had been "crammed" by an unscrupulous Web site hosting service, which had put up the site almost a year earlier. The Web company had been charging First Baptist, without its knowledge, $24 .95 per month for hosting the unauthorized site, through an obscure billing item on the church's Southwestern Bell telephone bill.
Federal, state and local law enforcement agencies are battling a spiraling number of complaints of cramming, especially from small businesses and nonprofits. The organizations get charged monthly fees, usually buried deep within their phone bills, for the hosting of sloppy Web sites that are unreachable through major search engines. In many cases, the sites aren't authorized by the organizations, which often lack the expertise or the staff to design their own Web sites or to scrutinize carefully their monthly phone bills.
The practice has spread as local telephone companies have started providing billing and collection for other companies' services, such as voice mail or Internet service. The Federal Trade Commission alone reported 9,827 complaints received in 1998, up from 221 in 1996. The FTC estimates that 1 million small businesses have been targeted by the scam.
The Feds seem to be paying attention. At a hearing today by the Senate Committee, a parade of victims, including First Baptist's Pi ckering, testified alongside government officials on their experiences with cramming.
Pickering said that his church was unaware of the second site until told about it by the committee's staff. After wrangling with the service company, he was able to g et the site removed and recover six months' worth of charges.
The committee's chairman, Sen. Christopher Bond (R-Mo.), called cramming a "sleazy practice." Bond, nostalgically recalling his earlier work in the Missouri state attorney general's office o f consumer protection, added that unscrupulous Web hosting services were engaged in "shameless profiteering" at the expense of churches and nonprofit groups.
The federal government is taking action on several fronts to combat cramming. In the next few months, the FTC is expected to issue a revised rule that requires express consent from customers for ancillary charges on phone bills and gives customers the right to contest them. The Federal Communications Commission has announced an order, effective Ap ril 1, requiring that telephone bills have clear descriptions of charges along with numbers to call for more information. Sen. Susan Collins (R-Maine) said that she has introduced legislation requiring telephone companies to provide easy-to-understand bil ling statements, instead of using ambiguous terms like "phone calls" and "monthly access fee" to describe various charges.
Also today, Jodie Bernstein, director of the FTC's Bureau of Consumer Protection, announced that the commission has settled a cas e against U.S. Republic Communications, a Texas-based service that allegedly made false claims about the Web sites that it provided. Under the terms of the settlement, the company, which admits no wrongdoing, must notify and offer refunds to 124,000 small businesses and organizations. U.S. Republic must also maintain a $1.8 million letter of credit as security against any refund requests.
In a written statement, U.S. Republic pointed a finger at "various telemarketing firms" that sell its services. The company said that while it "always maintained and monitored procedures designed to ensure the complete satisfaction of its customers, it was pleased to work with the FTC to develop even more ways to achieve that goal."
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