The alleged operators of a mobile “cramming” scheme, which placed unauthorized charges on consumers' phone bills, have received a major slap on the wrist from the Federal Trade Commission (FTC).
The defendants – accused of unfair billing practices, as well as setting up deceptive websites in order to collect consumers' mobile numbers – agreed to surrender more than $10 million in assets to the consumer watchdog.
On Friday, the FTC announced that Lin Miao and the corporate defendants Tatto (also doing business as Shaboom Media, Bune, Mobile Media Products, Chairman Ventures, Galactic Media, and Virtus Media) would turn over money in 14 bank accounts, as well five real estate properties in Chicago and Los Angeles, as part of the settlement (PDF).
Vehicles and jewelry will also be surrendered, an FTC release said.
The agency, which filed a complaint against Miao and the corporate defendants in December 2013, revealed that the settlement includes a monetary judgment of more than $150 million in total, but that the penalty was partially suspended due to Miao's “inability to pay the full amount after he turns over nearly all of his and the companies' assets.”
Cramming schemes are usually carried out under the assumption that consumers won't notice small, unauthorized charges on their bills. In this operation, the defendants allegedly marketed text messaging alerts to consumers (sending them messages about celebrity gossip or love tips, for instance), before charging users $9.99 without their permission.
Websites, where consumers could enter their numbers, were also allegedly used by the operators in order to later bill mobile users, the release said.
In addition to the monetary judgment, the defendants are also banned from continuing the unfair billing practices, including charging consumers for products or services without their consent.