FTC Wants Contempt Charges for Bogus Billing

WASHINGTON (CN) - Billing Services Group crammed more than $70 million in unauthorized or fictitious charges onto consumers' phone bills, the Federal Trade Commission claims in a motion for contempt.

The 22-page filing says BSG, the nation's largest third-party billing company, placed unauthorized charges on 1.2 million accounts "on behalf of a serial phone bill crammer amid a flood of complaints, while utterly failing to investigate either the highly deceptive marketing for these services or whether consumers actually used them."

This violates a 1999 settlement agreement with the commission prohibiting unauthorized billing, misrepresentations to consumers and billing for vendors who fail to clearly disclose the terms of their services, according to the FTC.

"BSG made it possible for con artists to steal people's hard-earned money by placing charges on phone bills for services they never ordered or used," FTC Consumer Protection Bureau Director David Vladeck said in a statement. "Under previous federal court orders, BSG cannot profit from the fraud of others and then deny responsibility for the harm they made possible."

The motion specifically cites Cindy Landeen whose companies marketed and provided most of the services for which BSG billed. Landeen "had a history as a crammer" and her participation should have been a red flag for BSG, the FTC claims.

Filed with the U.S. District Court for the Western District of Texas in San Antonio, the contempt action is the fourth time the FTC has gone after BSG or its subsidiaries for "cramming" charges onto phone bills. BSG is a billing aggregator that contracts local telephone companies to collect charges for services provided by third-party vendors.

Customers were charged for nine "enhanced services" that were seldom, if ever, used, including, voicemail, identity-theft protection, streaming video and directory-assistance services, according to the FTC.

It says 250,000 customers were billed for the streaming-video service, though just 23 movies were streamed between July 2009 and December 2010. The company also allegedly charged tens of thousands of consumers over $30 million for voicemail boxes even though customers used only 209 mailboxes.

Customers' overbilling complaints led Verizon, AT&T and other phone companies at various times to blocked billing by BSG associated- companies. Undeterred, BSG started billing consumers directly, according to the FTC.

In addition to Landeen's involvement, the FTC says that the volume of customer complaints proves BSG should have known it was charging for bogus services.

"Approximately 60% of the consumers BSG billed for each of the voicemail services sought and received credit for at least one charge from ... BSG," the motion states. "For comparison, in the credit card billing industry, a chargeback rate of 1% is considered suspicious and an indicator of fraud," the FTC added.

BSG continued to bill customers even after vendors declined to provide proof that customers had agreed to pay for the services, the FTC alleges.

The FTC wants BSG to refund $52 million in charges it hasn't already given back to customers after they complained about being charged for services they didn't authorize or use.

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