FTC warns small firms to watch out for Net scam
By Patricia Sabatini
Date: December 19, 2003
Small businesses in Pittsburgh and nationwide are being warned to check their phone bills for unauthorized charges for Internet services following more than 1,000 complaints tied to a group of companies based in Miami.
The Federal Trade Commission sued the Florida companies in late October, charging them with "cramming," which refers to the practice of loading up local phone bills with unauthorized charges.
The companies include Epixtar Corp., Liberty Online Services Inc., National Online Services Inc. and B2B Advantage Inc., formerly known as SBA Online.
The companies have denied any wrongdoing.
Complaints about the companies' practices were forwarded to the FTC from state attorneys general across the country, including in Pennsylvania, FTC senior attorney Carole Paynter said.
The commission's complaint accuses Epixtar and its affiliates of fraudulently marketing Internet services, such as Web site design, hosting and Internet access, to small businesses and nonprofits, and billing them without their informed consent.
The FTC claims the companies use various tactics to trick businesses into accepting a 30-day "free trial," or simply impose the offer, then fail to adequately disclose that the customer must cancel the service after the trial or automatically be billed $29.95 a month.
Some customers don't notice the charges, or see them only after many months, Paynter said.
When a customer calls to complain, typically the service is canceled but no refunds are issued, she said.
The FTC recently reached a temporary settlement with the companies, establishing a fund of about $800,000 for making customer refunds.
More money probably will be needed, Paynter said.
"We'll be watching and assessing whether the company changed its policies," she said.
In the meantime, the lawsuit remains in the preliminary stages, she said.
Unauthorized charges started making their way onto phone bills after deregulation began allowing telephone companies to do billing for other companies, Paynter said.
The bogus charges usually are made through a third-party billing partner that submits bills to phone companies from thousands of companies, she said.
At least one phone company, Southwestern Bell, received so many complaints about two of the target companies -- National Online and Liberty Online -- that it has stopped handling their billing, Paynter said.
Businesses that believe they have been victimized or are owed a refund should call the FTC in New York at 1-212-607-2829.
Paynter said small businesses often are targets of cramming because telemarketing sales rules are looser than those that apply to consumers.
The FTC estimates 3.3 million small businesses nationwide have been hit with cramming.
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