How Long-Distance Scams Work


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Most long-distance scams affect land lines. 
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You've just sat down to a nice family dinner and what happens? A telemarketer calls and asks you if you want to save big money on your long-distance bills, to which your response is probably one of the following:

  • To immediately hang up
  • To say, "Of course not -- I am always trying to find ways to spend all of this money that keeps piling up at my house! Paying too much for long distance is one of the best methods I have found to get rid of it!"
  • ­­To listen and hear about the deal -- How much money are they going to offer you to switch? What is the price per minute? What is the monthly fee?

Next Up

­If you do actually listen to the deal, can you even trust what they tell you? Are they giving you the details you need to make a good decision?

In this article, we'll uncover some of the big­ long-distance scams that can trip up even the most alert long-distance shopper. We'll explain what all of those charges on your bill mean and how to find the best deal for the types of calls you make.

 

What Makes Up Your Long-Distance Charges?

One of the most confusing things about your long-distance phone service is the fees that are charged in addition to the actual charge for your calls. Understanding these charges and how they are calculated will help you avoid paying more than you should be for your long distance.

For example, you may sign up for a $0.07-cents-a-minute long-distance rate and be pretty pleased with your negotiation skills, but is that really what you'll be paying? Did you read all of the fine print? Did you ask the right questions? There are many things that apply when your long-distance charges are computed. Here are a few things to make sure you ask about and understand.

In-state verses out-of-state calls
You get a great offer of $0.05/minute from long-distance carrier, but do you realize that the rates that are advertised are typically the rates for state-to-state calls only? The long-distance carrier may make that fact obvious, but more often than not this fact is obscured. You have to read the fine print and ask specifically what long-distance calls within your own state will cost. In-state calls are usually anywhere from $0.08 to $0.13 per minute from most carriers. A few may have better deals though, so if most of your calls are made to locations within your state, make sure you ask specifically about in-state rates.

Monthly service fees
You got a $0.07-per-minute rate and feel pretty good about it. However, there's a $4.95-per-month service charge that you have to pay to get the rate. Is that a good deal? Maybe, maybe not. The important question: How many calls do you make? Let's look at an example.

Let's say that you average 150 minutes of long-distance yakking per month. If you are getting a $0.07-per-minute rate with a $4.95 service charge, then you're actually paying a little over $0.10 per minute:

$.07 * 150 + $4.95 = $15.45 / 150 = 10.45 cents per minute

Of course, the more you talk, the more you save... or, at least the lower your per-minute cost will be. The key is knowing your calling habits.

Per-minute fees
Other aspects that can affect that per-minute fee are things like minimum call length, minimum total long-distance charges, time-of-day rates and billing increments. Let's see how those work.

Minimum call lengths
Let's say you get an advertisement for a long-distance service that says you pay $0.10 per minute for calls. You assume (as would most of us) that this means a three-minute call would cost $0.30. But with some carriers, there is a minimum call length in order to get the quoted per-minute rate. You might be told you get $0.10 per minute, but in the fine print it states that there is a $0.50 minimum-call charge. If you get someone's answering machine and hang up after leaving a 20-second message, you're still paying $0.50 for the call.

Minimum monthly amounts
You may even have a minimum amount you have to pay in calls each month. For example, some long-distance carriers require a minimum in long-distance calls of anywhere from $20 to $30 per month. You pay this amount even if you don't make ANY long-distance calls.

Time-of-day rates
Typically, long-distance carriers break up the day into two rate periods. From 7 in the morning until 7 in the evening is considered the "peak" period and gets the highest charged rates. From 7 in the evening until 7 in the morning is considered "off-peak" and gets the lowest charged rates. There may also be different rates for weekends and weekdays. Just because they say $0.07 a minute doesn't mean you'll get that rate around the clock. This might vary with long-distance carriers, so make sure you know when the best times to call are.

Call billing increments
How long is a minute, anyway? Sixty seconds? Sometimes it is, sometimes it isn't. Check with your long-distance carrier to see what billing increment they use for calculating the length of your long-distance calls. If it's a 60-second interval, then a second minute is billed if you talk for 61 seconds. If it's a 30-second interval, then one minute is charged if you talk for 31 seconds. If it's a six-second interval, then a full minute is billed only after you've talked for 55 seconds. (If you are connected for 30 seconds, you're only billed for half a minute.) From this, you can see that it is obviously better to look for a smaller increment.

Long Distance Fees and Taxes

Your long-distance carrier also has the option of passing on some fees to you. We talk about these fees later in this article, but here are some that are linked to your long-distance bill and are not regulated in the amount that can be charged to you. Make sure you check with the long-distance carrier to see what it charges its customers for these fees.


  • The Presubscribed Interexchange Carrier Charge (PICC) is a charge that the long-distance carrier has to pay the local telephone company for providing the phone systems to its customers. (PIC -- Presubscribed Interexchange Carrier -- is the term the industry uses to refer to a long-distance carrier.) The PICC is usually $1.04 per month, but there is no law about how much it should be, or if it has to be charged at all. Some long-distance carriers don't charge the fee to their customers at all, and some more than double the fee.

  • The Universal Service Fund Charge (USF) is another charge that you may or may not see on your long-distance bill. This charge, which is used to help provide phone service to rural areas, low-income customers and others, is usually a percentage of your out-of-state and international long-distance charges. The typical amount that long-distance carriers charge is 6 percent, but once again, they can charge anything they want.

Some Well-known Scams

Let's visit some of the most well-known long-distance scams. Maybe "scam" is too strong of a word -- let's call them "purposefully confusing" deals. The source of discomfort is the hidden restrictions that long-distance companies often apply to boost their rates. Unless you read the fine print, and ask questions when it says "ask about restrictions," you may feel as if you've been scammed, but the company is protected because the information was there (you just didn't see it). If, however, a company blatantly makes a statement that goes against the actual offering, you may have a case for the FCC.

Some of the techniques long-distance carriers use to lure you over to their services actually are good deals. You just have to make sure you find the good ones. Watch out for:

  • Companies sending you a check in the mail to encourage you to switch - You can cash the check, and in doing so it automatically switches you to their service whether you call them or not. However, rather than signing up for a plan that gives you a great rate, you get signed up for the basic plan that charges you as much as $0.25 a minute. You have to call to get the advertised plan.


  • Companies using old competitors' rates in their comparison charts - Make sure you verify the rates they post for competitors to make sure those competitors aren't offering a better deal now.

  • Getting a free prepaid calling card that automatically switches you over to their long-distance service if you use it - Sometimes you do have to call to establish the service and get a code to use with your card, but not always.

  • Companies offering promotional rates - Are the rates good forever, or will you be charged a higher rate after three months? Is there no monthly fee forever, or will it kick in after the promotional period is over?

  • The minimum call length that we talked about in the last section - You may get a great rate for calls over the minimum length, but if you don't reach the minimum you'll be paying very high rates. You never realize how many short calls you make until you see all of those charges on your phone bill.

  • Time restrictions for the rate you've been promised - Restrictions may not be obvious. It may be that the rate you get is only good at night. Does that fit your calling pattern? Make sure you know when you'll get the good rate and when a higher rate will kick in.

  • Using a special directory assistance company that advertises a flat rate for the service with no additional charge to connect the call - This may sound like a great deal if you have a good per-minute rate with your long-distance carrier. What you don't notice, however, is that by calling the special number for the directory-assistance deal, you're approving having the call connected and charged using that carrier's long-distance service, which is billed at a much higher rate than your regular carrier. The text "basic rates apply" might be the only statement you see that can tip you off that this is happening.

    (SOURCE: FCC)

Long-Distance Slamming

Slamming is the practice of a long-distance carrier illegally switching your long-distance service to its own plan without your knowledge. Slamming is the single largest source of complaints filed with the Federal Communications Commission (FCC), and the practice is still increasing. Most consumers don't even notice that they've been slammed, because they don't look very closely at their phone bills to see whom they are paying.

Slamming can happen without you doing anything, or it can happen when you enter a contest or respond to offers for free gifts. If you don't read the fine print, you may be authorizing a long-distance carrier to switch your service when you sign your name.

To protect yourself from being slammed, call your local phone company and ask for a "PIC" freeze. A PIC (Presubscribed Interexchange Carrier) is what the telecom industry calls your long-distance carrier. When you freeze your PIC, you are requesting that your local phone service not change your long-distance carrier unless you specifically call them and authorize it. There is also password protection to help ensure that someone else doesn't call to authorize the change.

If you've already been slammed, there are some steps you can take to correct the problem.

  1. Call your local phone company and tell them you have been switched to another long-distance carrier without authorization. They should be able to switch you back and should not charge you for the switching service.

  2. Call your long-distance carrier -- the one you thought you had, anyway -- and request that they return you to the same plan you had before. Again, there should be no charge for this.

  3. Call the long-distance company that slammed you and tell them to remove all charges for the past 30 days from your bill. You will have to pay for calls made more than 30 days prior to your noticing you had been slammed, but you will pay them to your original long-distance carrier at their rates.
  4. If the company who slammed you won't remove the charges, then file a complaint with the FCC.

If you notice you've been slammed after you've paid the bill, then the slamming long-distance carrier will have to pay your original long-distance carrier 150 percent of the bill. You'll be reimbursed that extra 50 percent by your original long-distance carrier.

Some states require that long-distance carriers use Third Party Verification (TPV) to verify that the customer is actually requesting that his or her service be switched to another long-distance carrier. The TPV will call you and ask you to confirm that you wish to switch your service.

You can always periodically check to see who your long-distance carrier is by calling 1-700-555-4141 from your home phone. To find out who your local phone service provider is, call 1-your area code-700-4141.

Phone Bill Cramming

Cramming involves illegally putting unknown and unexplained charges on your bill in the hope that you won't notice them, or will pay them anyway. This type of fraud can be club memberships, service programs, or simply vague, generic-sounding charges like "service charge." You may never use or receive the service or product, but you are charged for it. How do these charges get on your phone bill? There are a number of ways. Let's take a look:

  • Contest entry forms can bury their true intent in the fine print that no one reads or could comprehend if they did read. By signing and listing your phone number (so they can call you when you win!), you'll be authorizing them to bill you for their "service" or "membership," which you've probably never seen or heard of.

  • Direct mail sweepstakes are another way that your name and number can be captured and used in this type of scam. You may get a notice in the mail about a sweepstakes and instructions to call a number to see if you've won. This may automatically enroll you in a service that you don't want, but will be billed for on your phone bill.

  • Free calls via 800 numbers, like those for psychic services, or adult entertainment, request that you state that you "want the service" in order to get through to the psychic. This statement is recorded and used to enroll you in a service, club, or other type of billed program. You never receive anything -- probably not even the psychic reading -- and are billed on your phone bill for the "service."

  • Instant calling cards are access codes that reference your phone number and charge paid calls for adult entertainment to your phone bill. This may come about when a visitor (or family member) uses your phone to call an 800 number for an adult service. The person is given the code to use for future calls, and the code charges back to your phone number, not the caller's.

  • Dating services may also be a way of scamming unsuspecting people. When you call the service to talk with your date, you are told that your date will call you back and you'll need to enter a code to be teleconferenced. These charges are billed to your phone number and are usually mislabeled as collect or toll charges from other cities.

    (SOURCE: FCC)

To protect yourself from cramming, always review your phone bill for unknown charges. If you find charges you can't identify, contact your local phone company and find out how to dispute the charge.

  • Request that a 900 number block be placed on your number.
  • Don't respond when a recording requests that you state "yes" or "I want the service."
  • Don't enter codes into your phone unless you know what they are for and know it is a trusted source.
  • Always read the fine print when you register for a contest or sweepstakes.

If you think you've been crammed, call the company who placed the charges on your bill and try to get an explanation. If they are charges for services or products you did not authorize, ask them to remove them. Then, call your local phone company and report the incident. They should be able to help you get the charges removed. File a complaint with the FCC if you can't get any cooperation. Or, you can contact your state Attorney General's office.

10-10-XXX: Dial-around Services

Dial-around services are one of those services you see advertised that tell you to dial "10-10" and then three more numbers to bypass your regular long-distance carrier and save money. What they don't tell you is that you may not save any money at all; in fact, you may spend more for your long distance.

While not every dial-around service is out to scam you, some are, and you should be aware of how they operate. The catch with dial-around services is sometimes hard to figure out. Here are some examples of things to watch out for.


  • Many times, the discount or advertised price only kicks in after you've talked for 10 or 20 minutes. Until then, you'll be paying extremely high rates for a short call.

  • They may say that they offer a 50-percent savings over "basic" long-distance rates. That may still be higher than your existing long-distance carrier charges because you probably aren't subscribing to the "basic" service.

  • They may advertise a 20-minute call for $0.99. What they don't tell you up front is that any call under 20 minutes is $0.99, so even a one-minute call costs $0.99.

  • They may advertise $0.10 per minute. What they don't tell you up front is that there is also a $0.10 fee for every call, so even a one-minute call costs $0.20.

  • They may advertise $0.09 per minute on evenings and weekends, and $0.20 per minute for weekdays. What they don't tell you up front is that they also charge a 4.8-percent surcharge on all of your calls for the Universal Service Fund (USF), which is probably also charged by your regular long-distance carrier.

  • They may advertise $0.05 per minute for the first 60 days, and then $0.07 per minute thereafter. What they don't make obvious is that there is also a $4.95 service fee and $1.49 USF charge each month.

As you can see, you really have to ask questions and read all of the literature about these types of services. They can be a good deal in some instances. Just make sure you find out about:

  • Monthly service fees
  • Minimum call lengths
  • USF and other surcharges
  • Restrictions and rate differences based on the time of day

There may also be restrictions from your regular phone service. For example, some wireless phone contracts don't allow dial-arounds or phone-card use.

Prepaid Calling Cards

Prepaid calling cards are those cards you see being sold everywhere that give you $5 to $50 (or more) worth of long-distance calls. You buy the card and use it with any phone to make long-distance calls. The card has a toll-free access number that you dial when you want to make a call. You then enter a Personal Identification Number (PIN) that activates the card's account in the company's computer system. You'll then be prompted to enter the number you wish to call. It may be a lot of numbers to dial, but if you do your homework you can save money.

The retailers that sell these prepaid cards are just one player in the game. There are actually many players.

  • There is the long-distance carrier who sells blocks of time to resellers.
  • These resellers sell to or work with card issuers who set the card rates, set up access numbers, provide customer service, and maintain the PIN numbers and account information.
  • Distributors and retailers then sell the cards to their customers.

You won't usually know who the long-distance carrier is behind your card.

The price per minute with prepaid phone cards varies greatly, as do the number of additional fees that might be involved. The card may advertise that you can talk for 120 minutes, but that may be under very specific circumstances. While there are certainly cards that are good deals, and the convenience of the cards is perfect for some situations, there are still a lot of scams out there that take advantage of unsuspecting buyers.

The most common scams involve:

  • Unadvertised (or non-obvious) call connection charges
  • Unadvertised (or non-obvious) monthly fees
  • Unadvertised (or non-obvious) minimum call lengths
  • Unadvertised (or non-obvious) quick expiration dates
  • Unadvertised (or non-obvious) activation or setup fees

These fees eat into the total dollar value of the card, making that 120 minutes you think you're getting turn into a lot fewer. If you made a single call for 120 minutes, perhaps you would get the advertised deal. Making several shorter calls that each racks up connection fees and builds up higher charges because of the minimum call lengths, however, will result in getting far fewer minutes for the card.

Some other things to watch out for with prepaid phone cards include:

    About Pay Phones

    Regardless of the type of card you use, if you use a pay phone you'll be using an Operator Service Provider (OSP) -- the long-distance service provider for pay phones. Unless you dial a special number to connect to the long-distance carrier of your choice, you'll be billed at that OSP's long-distance rates. AND, even if you use a calling card, if that card includes your phone number as part of the card number, the OSP may be able to bill you for the call at its rates.

    The only way to be sure you'll be connected with your chosen long-distance carrier and billed at its rates is to follow the directions on the pay phone to call a different long-distance carrier. These directions are required by the FCC, so every pay phone should have them prominently displayed.

  • Pay-phone fees - In addition to the per-minute charge, connection fees and any other charges you may be paying, if you make your call from a pay phone you should expect to pay an additional surcharge. While the FCC approves an extra charge, card issuers vary greatly in the amount they charge.

  • Large billing increments - These can be as high as five-minute increments, meaning that even calls under one minute use five minutes of the card's value. Any call less than 10 minutes, but more than five minutes, uses 10 minutes of the card's value.

  • Delivery charges - If you order your card from the Internet or another source, you may also be charged a delivery charge. You also stand the chance of not receiving your card or not receiving a valid PIN.

  • No quality guarantees - Look for quality guarantees, as well as contact information for any problems you may have.

  • Invalid PINs - There have been instances of PINs that don't work.

  • Card issuers that go out of business - This makes your card useless and gives you nowhere to go for a refund.

  • Minute usage beginning as soon as you dial - Logically, you would think it would begin when a connection is made, but sometimes it doesn't.

  • Busy access numbers - If you can't connect to the access number, you'll never get through to make the call in the first place.

  • Higher rates for calls made to wireless or cellular phones

  • Instant calling cards - These services allow you to purchase the card online, get an access number and PIN and begin using it right away. While this can work fine and be a good deal, you may also find that buying a prepaid card this way leads to more problems with PINs not working or cards never being received.

According to the Federal Trade Commission (FTC), there are four questions you should always ask before you buy a prepaid phone card:

  1. What is the connection fee for each call?
  2. Is there a service fee?
  3. Is there a maintenance fee?
  4. Is there an expiration date?

In addition to these questions, you should make sure that you have a valid customer service number.

Call the International Telecard Association at 1-800-333-3513 to request an informational brochure.

Billed Calling Cards

These are credit cards specifically for making long-distance phone calls. Rather than paying for the calls upfront like with the prepaid calls, you pay on a monthly basis after you make the calls.

You can usually get a calling card through your existing long-distance carrier, or through a different carrier. Some carriers do require, however, that your residential or business's long-distance service be through a specific carrier that they are usually affiliated with. Or, they may be restricted to certain geographic areas. Like your regular long-distance service, you need to carefully examine each carrier's rates, charges, restrictions and everything else we've discussed here.

There might be:

  • A minimum monthly amount
  • Different rates for different times of the day
  • Surcharges for pay phones
  • A per-call surcharge

These types of cards are sometimes considered safer than their prepaid cousins. Since you're not paying for something you haven't received yet, you're not taking as much of a risk. If the service is through your existing long-distance carrier, you're also dealing with a known, rather than an unknown.

Long Distance Comparison Websites

So how do you know if you're getting the best deal with all of the rates, fees, tricks and scams that you have to watch out for? Are you up to the challenge of deciphering the ads and information on long-distance carriers' Web sites and comparing their rates, fees and special packages side by side? Don't worry, you don't have to be -- websites like MyRatePlan.com or SmartPrice.com have already done that. They maintain unbiased, current databases about nearly every long-distance carrier.

For example, SmartPrice.com's searchable database lets you enter some simple information about your calling habits and, in return, get a list of long-distance carriers that can offer you the best deal based on that information. You can compare rates, see all of the additional charges each carrier has, look at their billing increments, see their quality ratings, and switch your service on the spot when you choose to. No personal information is necessary to do the search.

What you'll get with the search may not be the lowest per-minute rate, but rather the lowest overall monthly bill. The database takes all of those variable fees and charges into consideration. You can then look at each carrier's plan to see which would work best for you.

Using a long-distance comparison Web site saves you the time and frustration of trying to find current information about various long-distance carriers and then compare each rate, fee and other aspect side by side in order to make a good decision.

For lots of helpful links about telephone service, scams and the FCC, see the links on the next page.

More Phone Industry Charges

If you have looked at your phone bill very carefully, you've probably seen a lot of charges that you couldn't identify. Are these charges that you have to pay, or can you somehow get rid of them? Most of them are charges that the government allows local phone companies to charge to recover some of the costs of a local phone network. Let's take a look at what should be there and what you should watch out for.

Here are some of the fees you'll probably see. Keep in mind that some of these have nothing to do with your long-distance service.

  • Municipal Charge
    This is charged to pay for local community services such as 911 and other emergency services.

  • Number Portability Service Charge
    The telephone number portability charge is a fee paid to your local phone service provider that allows you to retain, at the same location, your existing local telephone number when you switch from one local telephone service provider to another.

  • Universal Service Charge
    This is a fee that goes into a Universal Service Fund that was created to help make phone service available to low-income customers, customers who are in rural areas with higher costs, and customers with disabilities. It is helps pay for Internet access for schools and libraries, and it also helps pay for links for rural health care providers to urban medical centers for advanced diagnostic and other medical services that are available. All telecommunications companies that provide services between states have to contribute to the fund. The fee they pay changes each quarter based on the needs of the fund. They have the option of charging their customers all or a percentage of this fee. Most charge customers based on a percentage of the total bill, a flat fee, or a percentage of just your out-of-state call charges.

  • Federal Subscriber Line Charge
    This is a fee the government allows your local phone company to charge you in order to pay for the telephone lines connected to your home. It isn't a tax that goes to the government, but rather a fee the phone company gets for putting in and maintaining those lines. The government does put a limit on the charge so that phone service stays at an affordable rate for everyone. The charge can be as high as $5.00 for your primary phone line and $7.00 for additional phone lines into your home.

  • Presubscribed Interexchange Carrier Charge
    This is the fee the local phone company charges long-distance carriers for accessing what is called the "local loop." The local loop is all of the outside wiring, underground conduits, telephone poles and other facilities that are necessary to get phone service into your home and connect you to the network. This charge picks up where the Federal Subscriber Line Charge left off in helping local phone companies pay for the lines, equipment, and their maintenance.

For more information on long-distance calling scams and related topics, check out the links on the next page.

About the Industry

When the telephone service industry was deregulated in 1984, AT&T, who had a monopoly on U.S. telephone service, was broken up into many regional services, known as the "Baby Bells." This all began as a result of MCI (at the time, only a small carrier) suing AT&T over the right to access local telephone exchanges. In 1996, the Telecommunications Act opened up the market for local and long-distance service to even more carriers.

Deregulation has improved the long-distance services you have access to tremendously by creating competition, which leads to better deals. You now not only have more choices, but the choices come with better deals like lower rates, more calling plans and smaller billing increments.

Now, there are over 1,200 long-distance phone services, but you've probably only heard of a handful of them. The largest and most well-known are AT&T, Sprint, MCI WorldCom, and recently Verizon. And there's virtually no difference in the quality of the call, because they all use the same fiber-optic networks. The differences you'll see will be in the operations of the companies, such as the billing practices, the calling packages they offer, their rates and their customer service.

Services are also offered through Long Distance Resellers. These are companies that have no facilities for phone service themselves, but purchase blocks of time from large long-distance carriers who do. They buy large blocks of time at a big discount, which allows them to then resell it at a lower price and at the same time make a small profit. Their strategy is to make money through the volume of time they purchase.

This can be a great deal for the consumer because they get the same quality at a lower price.

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