At around 5.30pm one evening Jenny Hibbert’s cellphone was stolen from her handbag at a restaurant. Only noticing the missing phone at 10am the next morning, Hibbert immediately reported the phone as stolen.
Although only 17 hours had elapsed, R32 000 worth of calls had been charged to her MTN account. In a similar incident a Cape Town woman handed in her iPhone to be repaired, forgetting to remove her SIM card. Four days later the store informed her that her iPhone had been stolen, and by this time R170 000 had been charged to her account.
What many cellphone contract holders are not aware of is a new type of cellphone fraud which exposes them to unlimited call charges, making their cellphone contract their biggest financial liability.
Nomsa Thusi, head of media at Vodacom, says International Revenue Share Fraud (IRSF) is a new type of fraud where a syndicate steals handsets or SIM cards and uses them to dial international premium numbers in which they share a portion of the revenue. “This could result in cellphone bills as high as R120 000,” says Thusi.
This does not however fully explain how Hibbert’s bill reached R32 000 in such a short space of time. Even if a person spent 17 solid hours on premium-rated international calls, at around R8 per minute, it would only account for just over R8 000.
In Hibbert’s case her itemised billing showed that not only were calls were being made to Somalia at around R8 per minute, but that calls were being made simultaneously.
Extract from Jenny Hibbert’s cellphone bill
Leor Atie, director at Saicom Voice Services, explains that the syndicate calls a premium-rated number for which they get a portion of revenue. Using specialised equipment they conference additional numbers onto the call. “You can conference in five additional people onto the call. Thus you are paying for six calls concurrently and up to R48 per minute. That is how come you see a few calls at the same time,” explains Atie. At a rate of R48 a minute, a cellphone account can rack up charges of R2 800 within an hour if the theft is left unreported.
Unlike a credit card or debit card where the bank carries the liability for fraudulent transactions, cellphone companies have absolutely no liability and the customer is one hundred percent responsible for the resulting bill, despite the fact that fraud has clearly taken place.
This means for any person with a cellphone contract, their financial risk is unlimited; even a credit card would be limited to the amount of credit you have available; with your cellphone there is no ceiling to how much money you could owe.
The question is whether cellphone companies, knowing that this type of fraud is on the increase, are doing enough to protect and inform their customers.
When asked why MTN did not notice the unusual call volume on the cellphone number, Lucky Mokabane, head of public relations at MTN said that MTN is always on the watch to detect unusual call behaviour. “At times, the type of account a customer has with us can inform us not to be alarmed by the high volume of calls. The customer in question has an SME account which has a higher call limit than a normal user,” explains Mokabane, this despite the fact that the over the last six billing periods the average call spend on this phone was only R100 per month.
It is understandable that some commentators are questioning the tactics of cellphone companies, especially as they could be benefiting financially from these fraudulent calls. None of the cellphone companies were prepared to divulge the value of fraudulent calls made each month, however Karen Fourie, head of communication at CellC, said that this kind of theft and subsequent fraud is increasing.
Thusi explains that Vodacom (or any SA network) has to pay the international networks for any premium calls generated from local cellphones and “therefore cannot guarantee that the customer will have no liability if they don’t report their handset as lost or stolen,” says Thusi.
Atie believes there is no conspiracy by cellphone companies to make money out of fraud syndicates and that the negative publicity around these types of fraudulent calls would do more reputational damage than any revenue they earn.
He does however agree that cellphone companies need to re-examine their policies. “Sharing of the risk needs to take place; this is an evolving industry and it needs to keep up with the developing crime,” says Atie who advises consumers to negotiate with their network. While your network may have to pay the international network, they should not be making any profits themselves out of fraudulent activity and should not charge their portion of the call. “It is also incumbent on the networks to implement sophisticated fraud detection mechanisms and to suspend a SIM card when there is obvious fraudulent activity,” says Atie.
Currently there is no legislation, not even under the Consumer Protection Act, to protect customers from this unlimited liability. Ina Mering of Werksmans Attorneys says there is no legislation that could impose any obligations on the cellphone companies in terms of fraud as a result of theft. “Any person claiming from a cellphone company would have to prove that the loss suffered was caused by the company’s negligence or fraud. It would not be that easy”.
At the time of going to print neither the National Consumer Commission nor the Consumer Protector in the office of the DTI had responded to requests for comment.