Scratchcard company fined £100,000 by premium-rate regulator

The Cash Attack scratchcard service was the subject of 95 complaints and broke PhonepayPlus (PPP) rules on fairness, pricing information and competitions, the regulator said.

The service involved sending users a scratchcard which offered prizes to those matching three symbols on the card. The supposed winners were to call a premium-rate phone line or text a premium rate number to receive what the service called their award.

In fact by texting the short codes claimants were automatically subscribed to a £5 per week service which claimed to be a jackpot competition.

"Some complainants stated they had received unsolicited text messages and appeared to have been unaware that they had joined a subscription service," said PPP's ruling.

The service was misleading and inappropriately used the words 'win' and 'prize', PPP said.

PPP's Tribunal issued a formal reprimand to service provider Mobile Interactive Group Ltd (MIG) and imposed on it a £100,000 fine. MIG has been banned from promoting scratchcard services for three months. The ban will stay in place beyond that if the company does not comply with advice given to it by PPP, it said.

The premium-rate phone industry is structured so that it is not always the company that came up with a service that is hit with a fine. Service providers are the platform companies that deal with technical and infrastructure concerns to make a service live.

It is usually information providers which are the companies actually responsible for a service. The information provider for Cash Attack was Jackpot UK of Cheshire.

PPP regulates service providers, though, so MIG will be fined.

MIG chief operating officer Richard Mann said that Jackpot UK was a completely separate company to it and that it had already recovered the fine from it. Service providers are able to withhold revenue from information providers to cover any fines levied by PPP.

The PPP Tribunal also ordered MIG to pay refunds to all the users of the service.

PPP recently published plans to make the companies actually responsible for services more accountable. It has proposed updating its Code of Practice.

"In practice … PhonepayPlus’ regulatory powers are focused primarily on the service provider," said the regulator's new proposals. "Currently the 11th Code allows for a breach to be 'passed through' from a Service Provider to an Information Provider, if PhonepayPlus is satisfied the IP has caused the individual breaches and the IP accepts the pass-through."

"The majority of cases have both a service and information provider involved in the service – and so to some extent the breaches," it said. "We believe the new Code should facilitate the targeting of as many companies in a value chain as have been involved in causing consumer harm."

The proposals said that they would make it more likely that information providers will receive fines, suspensions and other regulatory actions.

MIG's Mann said that the current PPP structure did allow it to deal directly with information providers if all parties agreed, but that service providers were still liable for any fine if the information provider did not pay it.

"We don't do it that way," said Mann. "It is attractive in that it takes away all the day to day communication between PPP and the information provider but we are still liable if the information provider doesn't pay."

"It seems crazy to be paying money through to the information provider so that they can pay a fine to PPP when if they don't pay it we have to," said Mann. "We could end up losing out and paying twice."

Mann said that he backed PPP's proposals to regulate information providers more directly, but said that it was likely to take longer than PPP thought.

"In principle I support it but in practice there is a lot to work out, such as how PPP goes from regulating about 50 service providers to regulating more than 1,000 information providers without getting tied up in bureaucracy," he said.