Birch pays $6.1M to settle FCC billing, marketing investigation

Birch Communications will pay $6.1 million to settle an FCC investigation into what the regulator said was deceptive marketing and billing practices.

As part of the settlement, Birch will pay a $4.2 million penalty to the FCC and refund $1.9 million to consumers who filed complaints about unauthorized carrier changes or unauthorized charges within the past two years and adopt a compliance plan.

In addition to the $4.2 million fine and the $1.9 million consumer refunds, the FCC is requiring Birch to record all of its sales calls, verify any changes to a consumer’s preferred carrier, provide enhanced customer notice about early termination fees, and promptly investigate consumer complaints about unauthorized charges and carrier changes. Birch will also have to name a senior corporate manager as a compliance officer and file compliance reports with the FCC for five years.

“Consumers have a right to expect honest talk and fair dealing from any phone company,” said Travis LeBlanc, Enforcement Bureau chief for the FCC, in a release. “It is plainly unacceptable for any carrier to misrepresent its identity or purpose in order to mislead consumers into switching their preferred provider and to add unauthorized charges to consumer bills. Today’s settlement ensures that all of Birch’s customers will enjoy greater protections and that those who were unlawfully charged will get their money back.”

RELATED: Birch's Tomae: Charter, Comcast focus on mid-market, enterprise gives us more SMB opportunities

The FCC said the settlement with Birch Communications resolves an Enforcement Bureau investigation into whether the company engaged in deceptive and abusive marketing practices. Specifically, the investigation focused on whether Birch “slammed” consumers by switching their preferred phone carriers without authorization, “crammed” unauthorized charges on its customers’ bills and engaged in deceptive marketing. Practices like “cramming” and “slamming” result in telephone consumers paying for unauthorized services and expending significant time and effort to seek to reverse charges and services they never requested.

Birch is hardly alone in having to pay fines for cramming and slamming. Four phone companies had to pay the FCC $11.7 million in fines for apparently levying "mystery fees" on their customers. At that time, a Senate Commerce study revealed that cramming costs consumers $2 billion a year.

To combat the issue, the FCC issued a Notice of Proposed Rule Making on cramming in 2011. Under the FCC’s plan, the FCC would require service providers to notify their customers not only at the point of sale but also on their websites that they have the option to block third-party charges from their telephone bills, if the carrier offers that option. The FCC also asked that third-party charges be separated on bills from the telephone company's charges.