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Senate considers exponential growth in Web scams

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Old-fashioned Yankee hucksterism has been going high-tech lately, resulting in upwards of a million American small businesses being surreptitiously billed for Web sites which they don't even know they have. The Senate Small Business Committee heard testimony this week on the practice of Web site "cramming", a penny-ante scheme by which small business owners get bilked collectively out of scores of millions of dollars each year. The scam has developed in the past two years. Typically, telemarketers offer "free, no-obligation" trial Websites to busy outfits too small to employ their own Webmasters, such as barber shops and small motor garages. If the victim accepts the so-called trial offer, a single Web page with a piece of clip art and the company's address and telephone number is hastily run up and posted. Recurring charges of approximately $25 per month are then "crammed" onto the victim's telephone bill. A promised "information packet" is never sent, so that the victims are more likely to forget the contact, and overlook or misinterpret the phone charge. Committee Chairman Christopher "Kit" Bond (R--Missouri) estimates that there have been one million victims in the past 18 months. "Of the 100 small business owners contacted by my staff and myself, only one was aware that they had a Website and knew they were paying for it," Bond reported. He presented in evidence several screen shots of sites developed under the cramming scheme, all of which were comically poor. One, for an investment counselor, sported a colour close-up of a pizza being served. (To be fair, it did look quite appetizing.) Another, for a drilling outfit, touted the company's expertise in "secondary recovery threw horzinatal stimulation." The crammers use deceptive terms to conceal their bogus service charges. "It's hard to know you've been crammed when the charges are identified with such nondescript terms as 'monthly fee', 'membership fee', and 'service charge,'" Stanley Czerwinski of the General Accounting Office observed. Susan Collins (R--Maine) noted that "every day there seems to be a new technique for ripping off telephone customers." Telephone bills are an increasingly popular alternative method of billing among scam artists because they lack the consumer protections attaching to credit cards. Because few consumers will bother to lodge complaints over a scam involving a few hundred dollars a year, "we're really just scratching the surface when we look at the number of complaints," she observed. Collins sat on the Senate committee that investigated phone "slamming" two years ago. Slamming is a scheme to trick customers into switching their long-distance provider. Perhaps the most elegant practitioner was a company named "Hold". A telemarketer would ring a hapless victim and immediately ask, "May I put you on Hold?" If the mark answered "yes", it was taken as authorisation to switch them. Reports of slamming have fallen off of late, and cramming seems to be the new fad. And it's hardly limited to Web scams. "We even had one crammer named 'phone calls', so when a consumer read their bill, they would see 'phone calls' followed by a charge," Collins recalled. A number of crammers have been remarkably audacious. Kelly Cramer, an 18-year-old Freshman at the University of Wisconsin, testified that she had worked for Website crammer Protel Advantage as a telemarketer, as arranged through a high school training programme last year. She quit the job after learning that customers would be billed automatically if they accepted the "free, no-obligation" trial offer she had been touting. FTC Consumer Protection Director Jodie Bernstein confirmed Bond's estimate that approximately one million small businesses have been crammed to date. FTC has taken criminal action against largest, and is suing all but one of the smaller fry. FTC recently filed a complaint in fed court against US Republic, charging the company with cramming. US Republic is being ordered to notify its victims and offer refunds to an estimated 124,000 businesses, and file a $1.8 million letter of credit with FTC as security. Bernstein recommended revisions of the 1992 Telephone Disclosure and Dispute Resolution Act (TDDRA) to require express authorisation of all external charges to telephone bills. "If amended to encompass cramming, the 900-Number Rule will add to the FTC's arsenal against that practice, enabling the Commission to obtain civil penalties of up to $11,000 per violation," a recent FTC press release claims. Collins registered her support. "The fines right now are so low that telephone billing fraud pays," she remarked. ®

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