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FTC Puts $1.9M Kink in Phone Bill Crammer's Wallet
coondoggie writes to mention that the three largest companies in the billing aggregation market have been hit with a $1.9 million fine in response to the more than $30 million in bogus charges added to consumer's bills. The ringleader of the scam however, Willoughby Farr of Nationwide Connections, has been hit with $35 million and a lifetime ban. "Today's settlement would prohibit the companies from misrepresenting that consumers are obligated to pay for telecommunications charges that have not been expressly authorized. It also would be barred from billing or submitting any telecommunications charges for billing on a consumer's telephone bill unless such charge has been expressly authorized. [...] The FTC still has a case pending against other principals in this case: Yaret Garcia, Erika Riaboukha, and Qaadir Kaid. One other defendant Mary Lou Farr, has already settled with the FTC."
Here's how it works, They overcharge you an extra $1.
Some percentage of their cusomters will notice the $1, while most may not notice at all.
Out of the customers that notice, X amount will take action and call the company
The company Rep will respond that instead of receiving and immediate refund, they will put the "refund" into the system and it may take a while to process.
1 Month goes by and out of the small percentage that took action a month ago, a smaller percentage will realize that the refund never went through and call again.
The Rep will apologize and either deny the refund's existance, claim to "not have access to the records," or some other BS excuse. They will promptly "issue" a refund for you.
You may at this point recieve a $1 credit to next month's bill. Never a refund.
So by the end, 3-5% of the mis-billed customers may actually get their refund/credit. During the one and a half months it took to "process" the refund/credit, company that handles billing made X% interest on the overbilled cash. They made out like bandits on the refund thanks to the fact that it's done in such mass quantities. It benefits the company largely to have billing errors.
The other 95% of customer who never noticed lose $1 each. Cumulatively, the company with a 30 Million subscriber base makes $28 Million off a single billing error.
Of course, to make it look like a mistake, there won't be a 100% customer base billing error, but you get the idea.
The only way to rectify the issue is demand not only a refund but also interest on the money they stole, as well as credit towards the administrative overhead it took for you to navigate their phone menus for hours on end.
Belief? Hope? Preference?The Existential Vortex
How can the phone companies, or any company, be fined so little when the actual theft was far more? I mean, a $1.9 million dollar fine for $30 million worth of fraudulent charges?
1: Charge $30 million in fraudulent charges.
2: Generate gross fraud revenue of $30 million.
3: Customers report you.
4: FTC fines you $1.9 million.
5: KEEP PROFIT of $28.1 million.
6: Lather, rinse, repeat.
(Now that I think about it, this could be a buisiness model/method. I CALL PATENT!)
If a company makes more from fraud than it has to pay in fines, where is the deterrent? 28.1 million in retained fraudulent revenue won't discourage anything.
A better way:
1: Fine the company 50% of fraud revenue.
2: Force restitution of 100% of fraud revenue
If the combined amounts of the fine and fraud revenue exceed the total profits and cash reserves of the company, then allow the company to pay in installments that will allow the company to continue operating so that both the fine and restitution can be paid back, with restitution to defrauded customers taking priority over the fine. If the company keeps up fraudulent activity to the point where payments continually compound onto one another and the company cannot make all its payments because the amount exceeds it's profits and cash reserves, then the company, assets and all, is sold off to competitors or creditors, and the assets of responsible executives are used to reimburse shareholders, consumers, and creditors.
Fines need to be a *DETERRENT*, not an inconvenience.
Knowing Google's lust for data collection, the Soviet Union is still alive and well inside the psyche of Sergey Brin....