Through a credit card or bank account. At the end of every billing consumers would pay for their Telephone Service plus the purchase is that a page from thirdparty vendors. In theory using a telephone bill as a way to purchase goods and Services Makes some sense as a lot of potential. And it attracted a lot of interest. As several of our witnesses point out in their testimony today and do it very well, the socalled direct Carrier Billing method payment could benefit and bank customers, and other people looking for an alternative way dead shopper mecca charitable contribution. The reality of thirdparty charges on telephone bills is a markedly different story, a profoundly different tale and the fact of the matter is that it has not lived up to its potential. The pennant platforms. Figured out a way to beat the system. Theyve found ways still on cram unauthorized charges and have been absolutely relentless in doing so. So today most consumers still did not understand, including some of my colleagues, that their phone bills have often contains charges for things that they never actually bought. Surprise, they are paying for things that they never bought. And it is an unwelcome surprise to them, especially when it discovered that they have trouble getting refunds or that they cannot get their money back and all. In the 1990s and into the 2000s most cramming occurred on consumers wireline telephone bills. As this committee documented in an excellent 2011 hearing and report, American Consumers and businesses paid billions of dollars for facts, voicemail, celebrity gossip and other services they did not want and did not order. A few days ago there cranmers predictably turned their attention i should have said a few years ago they predictably turned their attention to the rapidly growing wireless telephone market. They figured out a way to a rip consumers off who had grown accustomed to purchasing music and other content on their phones through at text messaging based system called ps m. S. , premium short messaging system. The Commerce Committee staff and really wanted thank them for their excellent work has prepared a new report documenting how cranmers exploited the weaknesses in the premium messaging system to fraudulently charge American Consumers are actually hundreds of millions of dollars. And i ask unanimous consent to put this report and its exhibits in the record of this hearing. Both this report and the committees earlier report on landline cramming make it abundantly clear that telephone carriers were not doing enough to protect their consumers from prague. The key question is whether theyre doing enough now. Lear te carriers were not ding enough to otec wer they give access to their customer bills, collected their cut and fail to make sure that the third parties or acting honestly. In massive fraud that we documented the third apparentlies were acting honestly parties were acting honestly. The massive fraud weve documented in these reports happened right under the Telephone Companies noses. In the cases of both wire line and wireless cramming, the Telephone Companies had plenty of notice that crammers were placing fraudulent charges on their customers bills. Thaws of consumers thousands of consumers complained to both the companies and to state and federal Law Enforcement agencies about this problem, and i know, i received a lot of those complaints. Im sure that the ftc and attorney general sirells and my colleagues did as well. The federal trade commission and attorneys general brought case after case, enforcement action after enforcement action against crammers. When confronted with evidence of widespread fraud in their billing systems, the telephone carriers promised to tighten their rules and do a better job of protecting customers. But then the crammers seemed to go back to business as usual. The Telephone Companies acted decisively only after the evidence of fraud became overwhelming and undeniable. In 2011 the major wireline carriers agreed to end Third Party Billing, and in november of 2013 less than a year ago the four major wireless carriers, at t, sprint, tmobile and verizon, agreed to end Third Party Ms psms billing. Dont get me wrong, i dont think the Telephone Companies were happy or content that crammers were defrauding their customers. But they almost certainly welcomed the revenue that Third Party Billing was general b rating generating for them. The Committee Staff report released today found that the wireless carriers received 3040 of each charge that third parties placed on their customers bill through psms. For every 9. 99monthly charge placed on a bill, the carriers kept 3 4. Their financial incentive to allow Third Party Billing seems to conflict with their responsibility to protect their customers from fraud. Be they may not have been happy about it, but the fraud sure benefited them. While the telephone carriers have discontinued certain types of Third Party Billing, their systems are still open for business. As we will hear today, the carriers are experimenting with new direct Carrier Billing techniques. I hope we will not be sitting here in several months or several years and discussing how they, too, failed to protect consumers from fraud. The time for effective action is now. The notice has been abundant that consumers are suffering, and i hope that these new measures will be truly effective. I am now happy to yield to the Ranking Member, senator thune. Well, thank you, mr. Chairman, for holding this hearing to discuss the unauthorized charges on mobile phone bills and the findings of the chairmans wireless cramming investigation. I commend the chairman and staff for shining a light on these abuses. I understand, senator blumenthal, that youre graciously filling in for him today and appreciate that. Mobile payments are a growing way for consumers to pay for goods and services. There are legitimate uses for this manner of billing, for instance, consumers can provide money to charity, support a political cause or download the newest song or app and bill the purchase directly to their mobile telephone bill. Yet despite the industry efforts to implement protections and state and federal regulations in place to prevent cramming, unscrupulous actors have taken advantage of third party phone billing. Of course, crammings not a new phenomenon. In the late 1990s, congress devoted a lot of time and attention to the issue of cramming on landline phone bills. This committee highlighted the chairmans investigation in 2011 into cramming on landline phone bills and demonstrating the persistence of the problem. Some states have enacted laws in an effort to prevent cramming on landline phones and most of the major carriers have ended most third party types on landline bills. More recently, concerns have been raised about cellular lines. Th are three key from what i have seen there are some content providers and even some areas that appear to be bad actors, but all of the parties involved to do more to protect consumers from cramming. While cramming has been identified as a problem it is challenging to accurately measure how many consumers have been affected. I appreciate the wireless carriers and their association had taken a number of actions to prevent cramping and third for thirdparty charges. Significantly they decided to end most socalled premium as inez programs which built the summit customers for Text Messages related to topics like daily horoscopes and sports alerts. One carrier has recently decided to end browser based direct Carrier Billing. These steps show the carriers st. This issue seriously. We will ask whether they should do more. To end browserbased direct Carrier Billing. These steps show the carriers treat this seriously, but well be asking whether they should do more. At the same time, its [inaudible] the owners of approximately 188 million smartphones in this country spend more time with their mobile devices each day than they do going online with a laptop or a pc. While we must strive to protect consumers from fraud, we must also make sure we do so in a way that does not stifle innovation. I look forward to hearing from ctia whos here today to discuss how the industry is working to address these issues. I also look forward to hearing from commissioner mcsweeny who is here for the First Time Since her confirmation. Mr. Leblanc of the fcc and attorney general sirell. You play a key role in fighting cramming with Law Enforcements efforts and by educating consumers about Carrier Billing. I t to found that the midwest and the wireless connected region in the country was 44 of midwesterners living in cell phone only homes. This underscores the importance to my constituents in addressing the wireless cramming. This hearing prisons a Good Opportunity to recognize the good that everyone at the witness table is doing to combat cramming. Industry, federal agencies and state attorneys general all need to continue to Work Together on this issue to ensure they are protected against the actors. I look forward to your testimony. Thank you mr. Chairman. I will introduce the witnesses and then we will hear from you in this order. Welcome to your first appearance since the swearingin and april of this year. Prior to joining the commission the commissioner served as chief counsel for competition policy in the Governmental Relations and Governmental Relations for the United States department of justice antitrust division. He has a long and distinguished career in Public Service serving on the Deputy Assistant to the policy adviser to the Vice President and a number of other positions in the Public Service where she has sai and experiencn the areas of competition and antitrust as well as womens rights, domestic violence, judicial nominations, immigration and civil rights. Hes a graduate of Harvard University and Georgetown University law school. The general has served in vermont as the attorney general sends im trying for a number, june of 1997. I knew that it was about 13 years that we served together. And before that he was a prosecutor and a distinguished Law Enforcement officer. He received the National Association of the award given annually to the outstanding attorney general and served as the president of that organization for a year between 2004 and 2005. Hes a graduate of the university of notre dame and Cornell Law School and i know that he knows a lot about the subject because i worked with him on it and appreciate your being with us today. The acting chief of the Enforcement Bureau of the federal Communications Commission is a graduate of Princeton University and the law school on other institutions and has served before his present position in the California AttorneyGenerals Office as special assistant attorney general in charge of the Enforcement Bureau. Im sorry, the special assistant attorney general in charge of technology, hightech crime, privacy, antitrust and healthcare. He also advised the council and attorney general on significant appellate and constitutional matters. The senior Vice President and general counsel of the Wireless Association has served in that capacity since september 1990 not mistaken. And was a Trial Attorney in the division of the United States department of justice between 1980 and 1990. Hes a graduate of Colgate University and new york University Law school and we welcome you all and thank you for all of your Public Service. If we can begin with you. Its been a great member and a senator johnson for inviting me here today. I am the newest and her of the federal trade commission. I appreciate the opportunity of appearing today and the leadership this committee has shown on mobile cramming and cramming generally. I also want to thank the other witnesses for their perspective and the collaboration that commission has received from the federal Communications Commission and the attorney general in addressing this important Consumer Protection issue. For more than 15 years, the commission has been working with congress to stop fraudsters that place unauthorized charger on the neuters telephone bills. They began in the 1990s and have brought more than 30 cases resulting in hundreds of millions of dollars of judgments. As consumers have migrated to the smartphones and mobile Payment Systems and turned our attention to the unauthorized charges on mobile phone accounts. Mobile scams can take a variety of forms. Sometimes consumers are tricked into subscribing services by thirdparty merchants who use false pretenses to collect their telephone numbers such as promises of free concert tickets or 1,000 gift cards. In other cases they are current need for targeted by the deceptive ads and one example the consumers were targeted with an ad for virus protections for their phone and subscribe to read tons ring tones. These are automatically renewed and the charges for them are racked up front after month. Frequently consumers are unaware that they are being billed for thirdparty services because the charges are often difficult to locate on the boat and it is rarely clear that they are an associated with the phone service. Consumers who have pre paid accounts or auto pay bills do not receive bills at all or may not routinely inspect them. Since the spring of 2013 the federal trade commission has brought six Enforcement Actions aimed at combatin combating thef mobile cramming scams. Weve obtained a stipulated orders and three of the matters of judgments totaling more than 100 million. Earlier this month, the trade commission announced the first case against the telecommunication company. In that case they are alleging they deceptively described the charges on phone bills and unfairly continued to charge customers even more after it became aware of the telltale signs that charges were unauthorized. These Enforcement Actions were reinforced the basic Consumer Protections applied in the mobile environment. Just as they do in their brick and mortar world. Along with our lawenforcement efforts the commission has engaged with industry consumer advocates and developed recommendations to better protect consumers while enabli enabling. The staff recommends the carrier industry participations to reduce the fraud and the reliability of the mobile Carrier Billing. They will ensure that Advertising Marketing and the processes for thirdparty charges are not deceptive. They indicate the merchant is cramming unauthorized charges. For, thefourth, they should cley delineate thirdparty charges on bills and fifth, the industry should implement effective and consistent dispute resolution for consumers who wish to dispute charges or obtained refunds. Its critical that the carriers and other industry participants proactively address the mobile cramming. Thats why the ftc remains committed to working with this committee and with members of congress and the state and federal partners such as the state attorney generals into the Communications Commission to continue our efforts to shut down the scammers as they appear. Im pleased to answer any questions. Thank you, commissioner. General clarks. Thank you for inviting me to be here today to participate in this hearing and to speak from the perspective of the state ag. Although vermont is the lead state any 47 state effort right now, to combat wireless cramming that im speaking only on behalf of myself today its over ten years ago that vermont started addressing the problem of landline cramming and the first focus was on the thirdparty providers and not on the carriers but for Enforcement Actions and settlements and we recouped for 25,000 in vermont over 2 million of refunds. If you want to take vermont at two tenths of 1 of the u. S. Population and look at the nationally, just from the companies that we looked at and settled with that and the over 25 million americans and over a billion dollars lost to the landline cramming and thats just from those companies weve taken action against. Ultimately the selfregulation we realized they didnt work in the landline cramming arena and the state legislature band is actually all thirdparty charges on land mines. And then about three years ago the office with the other eegs turned the wireless arena. But in