New Web-Based Phone Scam Could Cost Small Businesses Six-Figure Damages

Corporations and individuals have been victimized by phone scams for a numbers of years, but now that most corporate phone lines are run over the Internet, web-based phone fraud has hit the prime-time. While major phone carriers have sophisticated fraud systems in place to catch hackers before they run-up false six-figure charges[1], small businesses generally use local carriers who don’t typically utilize elaborate antifraud systems.

In short, this new method of scamming involves hackers signing up to lease premium-rate phone numbers from a web-based service that charges dialers by the minute and gives the lessee a cut of the profits. Hackers break into an organization’s phone system, often over the weekend, and make hundreds of calls simultaneously. The hacker then gets a cut of the charges. When this happens with a major carrier, the carrier is often able to absolve the damages to cover much of the fraud charges incurred by their clients. Local carriers, however, can’t afford to foot this bill, and are instead leaving it up to their customers to pay, sometimes even suing their clients for the damages.

After many small businesses were hit by this scam in Albany, NY last year, New York Senator Charles Schumer pushed the Federal Communications Commission to adopt new regulations to protect small businesses. Currently, no regulations require carriers to reimburse customers for fraud the way that most credit companies would.

Industry groups are working hard to tackle this problem, but not much progress has been made.

To read more about this phone scam, please check out the following article recently published in The New York Times:

http://www.nytimes.com/2014/10/20/technology/dial-and-redial-phone-hackers-stealing-billions-.html?smprod=nytcore-iphone&smid=nytcore-iphone-share&_r=0

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[1] “Phone Hackers Dial and Redial to Steal Billions,” The New York Times, October 19, 2014