National Consumers League

Additional consumer protections could help prevent more Jamster’s

By John Breyault, Vice President of Public Policy, Telecommunications and Fraud The Federal Trade Commission (FTC) today announced its second major enforcement action against a wireless cramming scheme - a $1.2 million settlement with Jesta Digital, a.k.a. Jamster. While enforcement actions may give some scammers pause, the dozens of FTC enforcement actions against landline cramming scammers since the early 2000’s show that enforcement alone isn’t the answer.

As the FTC itself has stated, wireless cramming is a “significant consumer problem,” demanding action by federal regulators. We couldn’t agree more. Based on data reported by the California Public Utilities Commission, the Federal Communications Commission (FCC) and the Vermont Attorney General’s office, we estimated that wireless cramming fraud is costing consumers as a much as $887 million per year. As we have said before, the Jamster case as well as Wise Media and JAWA before it, are likely just the tip of a very large iceberg when it comes to wireless cramming. Unfortunately, the wireless industry seems determined to defend its assertion that there is not a significant wireless cramming problem in the U.S. For example, in June, CTIA, the wireless industry’s association, published an industry-funded study the called into question the results of an earlier study by the Center for Rural Studies at the University of Vermont.

The Vermont study found that 60% of third-party charges on consumers’ wireless phone bills were unauthorized. An earlier analysis by the Illinois Consumer Utility Board found that 44% of third-party charges were unauthorized. NCL has advocated for stronger consumers protections to address the growing problem of wireless cramming fraud.  Earlier this year, NCL and seven other public interest groups, called on the FTC to take a more active role in addressing wireless cramming fraud. Examples of reforms that could address the problem include requiring billing aggregators to obtain bonds from third-party service providers before initiating billing; prohibiting the use of negative option confirmations; and better reporting of consumer cramming complaints. As the primary regulator of the wireless industry, the FCC should also take action to address the role that carriers play in protection consumers from wireless cramming.

Reforms called for by NCL and others include requiring better disclosure of third-party charges on consumers’ bills; requiring consumer affirmative consumer opt-in consent before third-party charges can be billed; and improving cramming dispute resolution processes. When cramming fraud first emerged in the landline telephone space in the late 1990’s, the industry response was essentially “trust us, we’ll fix this.” More than a decade later, the problem persisted and the industry – under pressure from Congress, regulators, and public interest groups – finally took the right steps to end most third-party billing. How many more Jamster’s do we need to have before the industry gets serious about reforming a third-party billing system that enables wireless cramming?