Thursday, July 11, 2013

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Mobile Phone Content Provider Charged in ‘Cramming’ Case for adding Unauthorized Fees to Customers’ Cellphone Bills

AUSTIN – The Texas Attorney General’s Office today charged an out-of-state text-messaging content provider with violating the State of Texas’s consumer protection laws.

Today’s enforcement action charges Cellzum.com LLC owners Harvey Berg and Hunter Lipton, along with several other corporate defendants, with misleading Texas cellphone owners into unknowingly enrolling in premium short messaging services (SMS) that added a monthly $10 fee to their mobile phone bills.

Media links
Attorney General's lawsuit against Cellzum.com, LLC

Typically, SMS content providers use advertising to inform mobile phone users how to order premium short messaging services. Under the industry’s best practices, content providers are required to ask cellphone users to use a two-step procedure that include clear disclosures to “double opt-in” to the service and agree to be billed for SMS. Customers are then charged for the service directly on the cellphone bills.

According to the State’s enforcement action, however, the defendants used a deceptive practice known as “mobile cramming” to add unauthorized charges to customers’ bills. State investigators found that the defendants gained access to thousands of toll-free telephone numbers – many of which are similar to legitimate businesses’ toll-free numbers for functions like customer service. The defendants left misleading interactive recorded messages on these telephone numbers that instructed cellphone customers who often misdialed a legitimate phone number to push a button in order to receive a text message for more information. The defendants treated this action as authorization by the customers to be billed for premium short messaging services.

The State contends the defendants have violated the Texas Deceptive Trade Practices Act by failing to clearly disclose the cost and the recurring subscription nature of the premium short messaging services. The State is seeking an injunction and civil penalties as well as restitution for affected customers.