Join Date: Feb 2005
o2 Premium Rate Fraud and the £1m clawback mystery
O2 SIM distributors furious at £1m clawback penalties
16 July 2012
Distributors ponder legal action against ‘profiteering’ operator over gateway fraud fines
O2 SIM card distributors are facing clawback charges of up to £1 million as a result of so-called fraudulent use of its international SIM tariffs by end users.
The clawbacks relate to O2 SIM cards distributed between January and May this year.
O2 SIM distributors include Data Select Network Solutions (owned by Expansys), Elite Mobile, RP Europe, GK Telecom, Comm Sense and System Chytel.
The O2 International SIM card launched last November for prepay customers, offering cut-price calls to mobiles and landline numbers.
O2 told its distributors the clawbacks relate to SIMs that have been used to commit ‘gateway fraud’ – an act which occurs when free or low-cost calls and texts are channeled through a third party to reduce international fees.
Gateway fraud is said to cost operators more than £100 million per year in lost revenues.
An O2 spokesperson said: “In May, we identified some activity involving the connection of SIM cards which were used in unauthorised gateways.
“After a thorough investigation, we are clawing back commission paid to distributors in respect of SIM cards used in this activity.”
But distributors – who asked not to be named – dispute the imposed penalties.
Distributors who spoke to Mobile News claim O2 is penalising them for premium rate text messages that were sent on the SIMs – something which is not in their terms and conditions and which they have never been charged for previously by O2 or other networks.
They claim instances of clawback include when customers use their credit to pay for services such as placing a bet or even making charity donations.
Despite requests, O2 is yet to explain its reasoning to its partners, they claim.
One distributor said: “O2 has classed this as gateway fraud, but everyone in our market is adamant this isn’t. We’re providing the IMEI number it was topped up on but they’re dismissing that. In our contracts, premium texting is not classed as part of fraud.
“They have made the distributors the scapegoats and profiteered from the issue.”
Another added: “If premium messaging is now deemed as fraud, then why don’t they ban it from their network?
“It’s a mystery as to why O2 is now classifying this as fraud when previously it wasn’t. They need to explain themselves as this is a serious amount of money.”
Distributors say O2 typically provides a list of clawbacks within the first week of a new calendar month. Money is then recouped from their reseller partners.
But due to the clawbacks dating back up to five months, they claim they will have to pay the bulk themselves and some are considering legal action against the operator.
“There is no way we can levy the clawback, we’ll have to pay for it ourselves,” said one.
“We’re fighting this battle but for us to go legal against these guys will cost a lot of money, so people are weighing up their options.”
Another added: “For many distributors, an annual profit of £1 million is a real achievement and for them to lose this figure in one go is really detrimental.”
So are o2 holding the distributors financially liable because the supplied SIM cards to fraudsters who were also operating the premium rate services/lines?
So the Networks don't use their 'clawback' agreement to protect their customers that have huge premium rate bills run up on stolen phones etc.....a thoroughly dishonest corrupt industry
Last edited by El Gringo; 16-July-2012 at 18:15.