"and are texted a pin code to enter on the quiz. Once they’ve done that, they’ve just subscribed to a $9.99/month subscription"
How does that even work? I think in Germany to start such a subscription, one would have to send a SMS to a specific number. Sounds as if in the US there are other ways?
Or is it simply that a phone number equals a bank account? A company could do the same if it could just get a person's bank account number, and just start deducting money?
As a business owner I can attest that a phone number equals a bank account.
Daily we receive phone calls that are designed to trick the unwary into agreeing to being billed for worthless services.
After the third or so time an employee had been conned into a free website deal or a listing in a worthless business directory. I called my phone provider in a rage and demanded a third party billing block.
To which they replied, "No problem sir, most people don't even know we offer that service."
Obviously the phone company gets a cut and for that reason are happy to act at middlemen.
One would think that an honest broker would require you to opt in to the system, rather than merely providing a virtually unknown opt out option.
Facebook is doing the same thing as the telcos, for their cut.
The way it works is through premium SMS billing. The $9.99 monthly subscription is just ONE text that is delivered to your phone every month that costs you $9.99. The provider can send you other texts during the month as a part of your subscription, these are billed at standard prices. When this industry began, the texts you received during the subscription were ALSO charged at $1 or so, so you can imagine what kind of revenues those companies were making in the beginning. But Mobile Marketing Association and the carriers seem to have gained some conscience, albeit very late.
Phone-based payment is popular in many countries where credit cards aren't as common, or are more tightly regulated. Usually it works by submitting your phone number, being texted an authorization code, and then submitting that code back to the merchant.
The situation in the U.S. is a holdover from the heyday of 1-900 phone numbers and phone-based home shopping, where customers genuinely wanted to be able to purchase things from a vendor over the phone.
Credit cards weren't quite en vogue, and provided a stopping point where the customer could have a chance to bail. The phone company was more than happy to get some revenue off of a service that both the vendors and consumers genuinely wanted, but they didn't really think the details through.
Nor did they expect that cheap internet and mobile phones would magnify a non-optimal payment system into a massive factory for scams.
I believe that by entering the PIN, you're agreeing to the contract. It seems like total "shit, double shit, and bullshit" to me, but it doesn't seem totally outside the boundaries of the law. Might be wrong, though, as IANAL.
Nope, the pin is purely a verification step for the points you're getting in return for the scam-signup.
The legal 'opt-in' step that the scammer claims gives them the right to bill you, is the 'enter your phone number for an SMS' step.
The opt-in probably won't be enough to satisfy the watchdog organisations that overlook this kind of stuff (ofcom in the UK for example) but it will be enough to broadside a legal complaint of simple fraud (ie, police involvement), and thus send the complaint to the watchdog authority...
The reason they do this is, if they can avoid the police shutting them down with a 'simple' investigation, then they get months upon months as someone like ofcom investigate, and during that time they can rack up the profit, then 'run' (declare bankrupcy and hide the profit) when the watchdog authority appears to be about ready to issue a fine.
(IANAL either, but have worked in the premium SMS industry, and seen this kind of 'ofcom-stalling' trick)
Basically, there's a method for companies to charge your phone bill their unrelated services. When you initially use a service (on a whim, perhaps) you are often subscribed to the service. In some cases, this is probably OK, maybe some people really want to be attached to a nonsense service, but the much more likely case is that someone used it without realizing there would be recurring fees.
How does that even work? I think in Germany to start such a subscription, one would have to send a SMS to a specific number. Sounds as if in the US there are other ways?
Or is it simply that a phone number equals a bank account? A company could do the same if it could just get a person's bank account number, and just start deducting money?