Franchise owners can suffer significant financial harm through illegal slamming and cramming
These practices are perpetuated by unethical phone service and long-distance providers who switch your service provider either without legal permission or by tricking your organization into agreeing. They may also add excessive, unauthorized charges onto your bill.
No matter how many protections you put into place in your own business, your franchisees may also put you at risk. Taking steps to protect yourself now could save you time and money later.
Understanding Slamming & Cramming
Since the 1980s, unethical communications providers have engaged in underhanded (and now, illegal) practices that can cost business owners thousands of dollars or more.
Slamming is the unauthorized change of a company’s communications provider. Cramming is tacking unauthorized charges onto a company’s phone bill.
The FCC requires companies to either use an independent third party to verbally verify the change or to obtain an authorized signature. A third option is to have you call a designated phone number to authorize the provider change. None of these verification methods is foolproof, however, and providers are more likely to switch now and ask questions later if you challenge the change.
You may have no idea that a change has taken place until you see your bill, or until you notice a distinct degradation of your service quality.
How Your Franchisees May Make You Vulnerable
If you provide phone numbers as a part of your franchise package, your franchisees could potentially increase your risk for being a victim of slamming, cramming or both.
Although your franchisees have no legal standing to make changes of this nature for your business, the companies who perpetuate these costly scams do not have a strong respect for what is and is not legal.
If a franchisee inadvertently provides what may appear to be “legal” permission for the switch, you could be in for a fight. A franchise owner who identifies himself or herself as the business owner — and who rightfully is the owner of their individual franchise — could provide all an unethical provider needs to justify a switch.
Preventing Slamming & Cramming for Your Business
The first step in protecting yourself from slamming and cramming is to determine what the requirements are for switching your service provider. Be sure that you (or someone you designate) closely examines your phone bill as soon as it arrives each month. If you have been the victim of a scam, you only have a limited time to dispute the charges.
If you haven’t already done so, contact your phone service provider immediately and ask them to freeze your account. This, at least theoretically, should prevent anyone but you from being able to change your service provider.
Provide information to your franchisees about the risks of these scams, including how to recognize them and how to avoid them.
Finally, explore the potential of adding verbiage addressing this issue to your franchise agreements. If you hold franchisees liable for incurring unauthorized costs, it may help make them more diligent.
If, despite your best efforts, you get slammed or crammed, the FCC provides remedies. However, depending on the circumstances, you may need legal assistance to sort out the problem.
Franchise & Business Law Group can help you with these and other legal issues related to your business. We are based in Salt Lake City, but we assist business clients throughout Utah. We can assist you with commercial and business law matters, trademarks and franchise law. Contact us today to learn more or to schedule a consultation.