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 Channel Futures

Business Models


FTC: Billing Services Group In Cahoots with ‘Serial’ Crammer to Tune of $70M

  • Written by Josh
  • May 8, 2012
Responding to the FTC's contempt motion, BSG asserted the agency's filing "represents an incomplete and inaccurate representation of the facts and leaps to false conclusions."

Billing Services Group, the largest U.S. third-party billing company, faces Federal Trade Commission allegations that it placed more than $70 million in unauthorized charges on consumers’ phone bills.

The FTC has asked a federal court in Texas to issue a civil contempt order against BSG and impose sanctions of roughly $52.6 million. The government agency alleges BSG placed spurious charges for such things as voice mail and streaming video on nearly 1.2 million phone lines on behalf of a “serial phone crammer.”

Cramming is slang for such unauthorized charges.

“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,” said David Vladeck, director of the FTC’s Bureau of Consumer Protection, in a statement Tuesday. “Under previous federal court orders, BSG cannot profit from the fraud of others and then deny responsibility for the harm they made possible.”

Responding to the FTC’s contempt motion, San Antonio, Texas-based BSG asserted the agency’s filing “represents an incomplete and inaccurate representation of the facts and leaps to false conclusions.”

“Apparently, the FTC’s view is that, because BSG settled litigation 13 years ago, BSG is liable for contempt whenever a service provider is able to evade the compliance measures implemented by BSG, regardless of BSG’s diligence and good faith,” the company said. “The bottom line is that the FTC is trying to blame BSG for the acts of another party.”

In the filing, the FTC identified Cindy Landeen as the crammer, who has served as the president of Alternate Billing Corp., a former BSG client in Minnesota that has been investigated by the Federal Bureau of Investigation. Landeen had a history as a crammer with another company called Phonebillit, according to the FTC’s court filing.

For five years, BSG billed customers for nine separate unauthorized services through phone companies providing local service, according to the FTC’s filing. “They included three voice-mail services, one streaming video service, two identity theft protection services, two directory assistance services, and one job skills training service,” the FTC asserted.

The FTC alleges BSG repeatedly ignored signs that its billings were fraudulent.

“BSG conducted no meaningful pre-billing due diligence and failed to adequately monitor or address the services deceptive marketing, enormous complaint volume, and near-complete lack of usage,” the agency stated. “Finally, even after some LECs refused to do business with the crammers, BSG kept billing for their bogus services and even solicited more business from them.”

BSG denied the FTC’s allegations and characterized as “ridiculous” the agency’s claim that it had knowledge about Alternate Billing’s operations that would have led it to suspect cramming.

“We have a strict protocol in place to thwart cramming, including a 100-point review process that all businesses must go through before we allow them to bill any customers, monthly performance evaluations, and a thorough review of all customer inquiries,” BSG said. “Our process includes pre-screening vendors, authenticating charges and a testing to confirm the authenticity of charges. We believe in the effectiveness of our due diligence processes, which have reduced reports of cramming to extraordinarily low levels.”

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