Ars Technica’s Nate Anderson writes about the FTC’s lawsuit against Streaming Flix and its billing partner, Billing Services Group. The companies are accused of putting random charges on peoples’ phone bills through trickery (fine-print in seemingly unrelated signups) or outright fraud (simply adding charges to random phone bills, like a local public library’s storyline, which plays recordings of stories to callers). The companies have taken millions out of phone-line owners’ pockets in a fairly brazen ripoff, and the carriers are unwilling to take any real action against them because — naturally — they get a cut.
As the middleman, BSG makes similar claims about being duped, but the new FTC complaint tries to show that the company had ample reason to know it was aiding a fraudulent enterprise. (These claims are detailed, extremely detailed, in a 45-page appendix to the original FTC complaint). For instance, the FTC says that BSG saw the “astronomical refund rates” requested by Landeen’s “consumers,” including a 60 percent refund rate on the voicemail products alone. BSG was also notified that major carriers like Verizon and AT&T were cutting off various Landeen products at different times due to the complaint rates that the telcos themselves were seeing.
What about BSG’s “strict protocol” and “100-point review process”? According to the FTC, the company did evaluate Landeen’s businesses. At one point, BSG performed its own “scrub” of the list of AT&T numbers billed by 800 Vmailbox and Digital Vmail—and found that 5,430 of the 8,413 phone numbers being billed didn’t match the name and address provided by the voicemail company. But after the scrub, the FTC says BSG opened no broader investigation into this staggering rate of error. BSG did not proactively offer refunds, and did not notify law enforcement. In fact, it “doubled down on its relationships with the crammers, approving two new Landeen services for billing in the fall of 2010.” BSG even agreed to bill for Landeen’s services, says the FTC, after Landeen’s company admitted that only 20 percent of those billed were even expected to use them.