FTC and Phone Billing Companies Settle Contempt Charges for Unauthorized Billing

The Federal Trade Commission and several telephone billing companies submitted a proposed stipulated order to the United States District Court for the Western District of Texas to resolve allegations that the billing companies violated a 1999 court order and permanent injunction concerning charges of phone bill cramming. The billing companies have agreed to pay $5.2 million to resolve the contempt charges stemming from their failure to comply with the 1999 order that had enjoined the billing companies from placing charges on customers’ phone bills unless the charge was expressly authorized.

The settlement agreement and proposed order follows a November 2013 evidentiary hearing and a report and recommendation by a magistrate judge that recommended finding that the billing companies had violated the 1999 order by permitting unauthorized billing by voicemail service providers on a large scale.

The billing companies operated as a phone billing “aggregator,” passing charges from third parties to telephone companies to place on consumers’ telephone bills. In the proposed order, the billing companies admit that they failed to vet the charges before processing them and that they did not investigate consumer complaints about unauthorized charges.

The proposed order specifically bans the billing companies from adding charges for “enhanced services” such as e-mail or voicemail onto consumers’ bills. The settlement also imposes compliance reporting and monitoring requirements. Under the agreement, the billing companies will pay the $5.2 million in ten payments, with a payment being made every 90 days until the judgment is paid in full.

The settlement demonstrates the importance of strong regulatory compliance initiatives, including implementing “know-your-customer” programs and monitoring consumer complaints for trending problems.