David Bach The Automatic Millionaire

Americans love their cell phones -- most of us can't live without them. Yet the Better Business Bureau reports that cell phone providers are the No. 1 cause of complaints among consumers.

This is mostly due to incorrect billing, confusing fees, unexpected charges, and deceptive contracts. These can certainly add up, but I was shocked to learn that the most significant -- even devastating -- monetary damage can occur when your cell phone is lost or stolen.

A $26,000 Cell Phone Bill

A recent CBS 5 ConsumerWatch report by Jeanette Pavini profiles the plights of three consumers in California -- all of whom had their cell phones stolen and were left stuck with a huge bill for unauthorized charges.

The report told the story of San Francisco resident Wendy Nguyen, who was shocked to receive a bill for $26,000 after her cell phone was unknowingly stolen before she left for an overseas vacation. Cingular held her responsible for charges incurred after the phone was taken, up until the time Wendy discovered the theft and called the carrier.

She was able to prove via airline and passport documents that she was out of the country and couldn't possibly have made the unauthorized calls from San Francisco during that time, but Cingular still held Wendy accountable for all charges.

Not only that, they advised Wendy that if she couldn't pay the bill she should consider filing for bankruptcy!

Adding Insult to Injury

Eileen Perrera's story revealed what happened after her phone was stolen while she was on vacation. She filed a police report and contacted Sprint immediately, but then received a bill totaling almost $16,000. Sprint claimed to have never received the call from her reporting the stolen cell phone.

Eileen was able to submit proof from landline phone records that she had indeed called Sprint customer service. As her late fees piled up, the situation remained unresolved for months.

Then there's Pamela Woodson's story. As revealed in the CBS 5 ConsumerWatch report, when Pamela's cell phone was stolen she reported it the very next day. However, by that time her account had already incurred over $1,800 in unauthorized charges. Due to the suspicious nature of the fraudulent charges, she was actually interviewed by the FBI -- and cleared of all responsibility. Nevertheless, T-Mobile pressed on, insisting she pay the outstanding charges in addition to late fees and interest.

Can This Be Legal?

If you dig through all the fine print in your cell phone contract, you'll most likely discover a statement that reads something like this: "Should your cell phone be lost or stolen you are responsible for any costs incurred for unauthorized calls made prior to reporting the cell phone missing."

Unlike a credit card, cellular contracts are not required to limit liability for fraudulent charges. But it's also important to realize that the extent of your liability as stated in your contract is your provider's policy -- it's not a law.

The laws that give consumers the right to dispute unauthorized charges vary from state to state. In states where the laws do exist, they're not doing much good because there's no single independent agency set up to review evidence, enforce the laws, and provide a timely resolution.

Why? It all comes down to money. In California, for instance, the significant financial contributions made by the wireless industry to state government gives the telecommunications industry enormous influence over entities like the Public Utilities Commission. In effect, this allows the wireless industry to make up its own rules.

Avoiding and Responding to a Theft

Are we at the mercy of an unregulated industry that's free of consequences and penalties? Not if we learn how to defend ourselves.

This year, an estimated 600,000 cell phones will be reported lost or stolen. Here are the 10 things you need to know to protect yourself from cell phone theft and fraudulent charges:

1. Guard your cell phone like you would your wallet.

Yes, this is obvious advice, but frankly the best way to not get stuck with fraudulent charges is to do what you can to prevent unauthorized calls in the first place.

On a related note, think twice about what information you store on your device. A stolen cell phone can not only lead to a huge bill, but to identity theft as well.

2. Password-protect your device.

Check the user guide that came with your phone and start using the "lock" or "password" feature to potentially prevent a thief from making unauthorized calls. There are ways to override passwords, but at the very least you might be buying yourself some time until you discover the loss and call your provider.

3. Don't be fooled by cell phone insurance.

Purchasing cell phone insurance will provide coverage for the device itself, but it won't protect you against charges for unauthorized calls.

4. Call your cell phone provider as soon as you discover the loss.

Report your missing device, and be sure to keep meticulous records including the date and time you called your carrier, the name and ID number of the representative to whom you spoke, and what you were told.

Also note the state or region of their call center, plus their telephone extension number. Finally, ask for confirmation in writing that your device has been disabled. Some companies can even email this to you.

5. File a police report.

This may not help your chances of getting the stolen phone back, but it still provides an official record of the crime. Your carrier may even require the police report number when you phone in the loss.

6. Open an investigation with your carrier if necessary.

If you find that you're not getting an immediate resolution by working directly with your cell phone company, don't waste another minute. Call your carrier and request an investigation, then follow up in writing. Generally, requesting an investigation gives you a better chance of preventing any formal collections action to be taken and should also delay reporting to any of the credit bureaus.

When you request an investigation, advise your carrier that you'll be filing a complaint with the Federal Communications Commission (FCC), your state attorney general's office, and your state's public utility commission (PUC). Your carrier is more likely to pay closer attention to you when they know you're an informed consumer.

According to a 2006 AARP/Roper cell phone survey (of adults 18 and over) 48 percent reported not knowing who to call in the event their cell phone carrier could not resolve a billing or service problem to their satisfaction. Items 7 through 9 below shed some light.

7. Contact the FCC.

The FCC will forward your complaint to your service provider, requiring a response from them within 30 days. You can contact them via their web site or call them directly at (888) 225-5322.

8. Contact your state attorney general's office.

According to ConsumersUnion.org, state attorney general offices will handle complaints about cell phone fraud and contract disputes. This office has filed lawsuits against wireless companies based on consumer complaints, resulting in refunds to consumers and agreements by some companies to reform certain practices.

Find the contact information for your state attorney general's office here.

9. Contact your state's PUC.

Each state has a government agency, usually called a public utility commission, that oversees telephone companies. To locate your state's PUC online and to file a complaint, visit the National Association of Regulatory Utility Commissioners web site.

10. When all else fails, contact the media.

The wireless companies are particularly adverse to negative media attention, so until effective laws are put into place you may have to resort to contacting your local TV station.

In Wendy, Pamela, and Eileen's cases that's just what they did, and their stories all have happy endings. After many months of persistent determination and followup, all fraudulent charges were dropped. It seems the wireless industry wants to do the right thing after all -- as long as they're forced to by the media.

Ultimately, CBS 5 ConsumerWatch played a huge role in getting each situation resolved. But don't be tempted to skip steps 7 through 9. The FCC, state attorney generals offices, and PUCs all need to see how serious a problem this is, so formal complaints serve an important purpose.