ConsumerWatch

by Jeanette Pavini
SAN FRANCISCO (CBS 5) ― Until it happens to you, it's hard to believe that your cell phone company could charge you hundreds, even thousands of dollars, for calls you didn't make -- but that's just what's happening in case after case uncovered by CBS 5 Consumerwatch.

It occurs when thieves steal cell phones to make calls while wireless providers hold consumers responsible for their fraudulent charges. Now, our investigation reveals that cell phone companies could do a lot more to protect you against fraud than they're willing to tell you.

Cell phone companies spend millions advertising their great services. But one thing they seem to keep mysteriously secret is how sophisticated they are at detecting fraudulent calls if your cell phone is stolen. Ann Haung of San Francisco found out just how sophisticated when she returned home from a vacation in South Africa.

"I got a call from a girl name Jane," said Haung.

Jane, from Cingular, said they had detected a "suspicious spike" in calls from South Africa, and had shut off her service. That's when Ann realized her phone was missing from her luggage. She was thankful that Cingular had detected the theft -- but gratitude turned to shock when Ann was told the usage fee was $16,388. And Cingular expected Ann to pay the bill.

Her reaction? "I said what! I had her repeat the number even down to the cents!"

It's one of several similar cases CBS 5 Consumerwatch has reported. Cingular charged Wendy Ngyuen $26,000 when her phone was stolen. T-mobile charged Pamela Woodson $1,700, plus penalties. Sprint charged Eileen Herrera nearly $16,000.

Ann Haung disputed the charges and tried to show Cingular evidence that she had left South Africa before the fraudulent calls were even made. Nevertheless, Cingular charged her another thousand dollars in penalties, threatened her credit rating, and sent her to a collection agency, leaving Ann with a simple question, "should I pay for the criminal things?"

A fair question, considering that if thieves had stolen Ann's credit card instead of her cell phone, federal law dictates she would only have been liable for the first $50 in fraudulent charges. The credit card company would be responsible for the balance. And that's exactly why credit card companies are so vigilant in halting stolen charges as soon as they can -- using sophisticated anti-fraud technology to protect themselves against losses.

We wanted to know how the wireless industry fights fraud, but they wouldn't tell us. So we went to ask Fair Isaac Corporation in San Diego, the same people who provide fraud protection technology for most of the credit card industry.

"We've taken that same technology, adapted it, deployed it in telecom," said Tony Zarrella, Vice President for Cell Phone Fraud at Fair Issac.

He said the company spent years building computer systems that can analyze billions of cell phone calls around the world - while they are happening. A major deviation in someone's normal calling pattern is supposed to immediately alert cell phone company investigators.

"They would identify that there was suspicious activity. They would investigate. In some cases, it's going to be so blatant, that they may just shut off the account. In other cases, if there's some question, they may attempt to contact the individual," Zarrella told CBS 5.

So if wireless companies can detect fraud the same as credit card companies, why are they charging their customers thousands of dollars for calls they didn't make? "I think it comes down to greed," said Bill Nussbaum of TURN, The Utilities Reform Network.

Nussbaum said there is no federal law to stop cell phone companies from passing fraud charges along to customers: "There's absolutely no incentive to do anything else. Because the way they figure it, hey, if we can get the money out of them then they're ahead of the game, even if they shouldn't be charging."

And as for wireless companies appearing to be so secretive about their fraud protection, Nussbaum said, "I think the reason they don't tell the people they have this security system is because then there'd be no excuse for them to be billing people for calls they didn't authorize."

But as it turns out, there are laws in California to protect customers like Ann Haung but no one has been forcing the wireless industry to obey them.

"It is not legal for them to attempt to collect money from customers for services that customers did not authorize," said Deputy Attorney General, John Donhoff.

He added that the California Attorney General is now investigating cell phone companies: "We're on the case. You've done a public service by bringing the anguish of these folks to the attention of both the PUC and the attorney general's office. And we're not ignoring it."

In Ann Haung's case, after we contacted Cingular, the company said it had made, "…a series of inadvertent human errors…" and reversed all charges. Wireless companies also reversed charges in the other cases we've reported and again, only after contacted by CBS 5 Consumerwatch.

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