MilesBuzz! - MCI charging for miles

I just got through a heated email exchange with MCI over my discovery that they have been secretly charging me for miles at the rate of more than $1 for every 1000 miles. This charge is buried in a taxes/surcharges line item and ends up being an unadvertised increase in the per-minute call rate.

While it's not a large amount of money, I'm outraged by their reply (as usual, their customer service is wholly unsatisfying, which is why I've switched back to AT&T). Anyone interested in starting a class-action lawsuit?

Here's their response to me. My favorite line is "Moreover, a customer is presumed to have knowledge of
the filed tariff terms." Right!

-----

Thank you for contacting MCI WorldCom Online Customer Service with
questions about the federal excise tax mileage surcharge.

The government requires MCI WorldCom and all other companies that buy
airline miles to pay a federal excise tax (FET) on the cost of miles.
MCI WorldCom and other companies must pay these taxes to the airline
directly, and the airline then pays the IRS. In order to recover
these costs and continue to award the same level of miles, MCI must
pass this tax on to airline program customers as a surcharge. This
charge is tariffed by the FCC.

This surcharge appears on the Federal, State and Local Surcharges line
of your invoice along with other nominal taxes and surcharges. After
your airline partner has confirmed posting of miles to your frequent
flyer account, this surcharge is applied. This surcharge appears on
your invoice at least one month after you earn the miles.

While we are sorry that these surcharges were not explained to you
up front, these charges are located in our tariff filed with the fcc.
A customer's relationship with MCI WorldCom is governed under the
terms of MCI WorldCom's tariff, which sets forth its rates,
practices, classifications, and regulations for and in connection
with its communications services. The content of the tariff is
subject to Federal Communications Commission ("FCC") regulation.
The tariff has the force and effect of law and is not merely a
contract. Moreover, a customer is presumed to have knowledge of
the filed tariff terms.

We appreciate the opportunity to service you online. MCI WorldCom
strives to provide you with the highest quality of customer service
and is committed to bringing you new and innovative ways to keep in
touch with your family members and friends. If you have any
additional questions or concerns, please visit MCI WorldCom Online
Account Manager at www.mci.com/service.

Sincerely
John
Online Customer Service

This is one of many reasons I stopped dealing with MCI some time ago. The miles aren't worth it.

Perhaps it is not worth having MCI for the long run but certainly bouncing between Sprint and MCI to put big bonuses into your mileage accounts as well as those in your family is worth it.

After I collect all my month bonuses, I plan to switch to Cable & Wireless (this is my internet provider -- www.cwix.com) which will charge only .07 per minute weekdays and .05 on Sunday. Since miles are worth .02 each, it is obvious that you are paying for the miles after the big bonuses anyway. Cable & Wireless can be contacted at 888-724-8143.

Thanks for Cable + Wireles's number. I'm always looking for simple reasonable rates that I can go to after all the dust clears.

I'm certainly not one to stand up for MCI customer service, but they have to break the information out that way. Your not actually paying for the miles, but the tax on the miles. This is due to miles that are sold being taxable. If you rent from Hertz, you'll see them the same thing. As for pricing, I think 9 cents a minute all the time plus 5 cents on weekends plus regular miles + the 25M bonus makes it worth sticking with them.

I understand why the miles are taxable, and that is without dispute. The line about requiring the customer to pay for it is a complete and total crock.

I worked for a large insurance company several years ago, and a mistake by the company resulted in incorrect withholding from a few customers' accounts. These were very BIG customers who did a LOT of business with us, and coming back to charge them some tax would (1) annoy the customers and (2) not exactly look good for the company.

The company made a decision that rather than risk alienating the customers and losing their business, they'd just eat the tax expense. They paid the IRS and the customers were never the wiser. The IRS didn't care, they got their money.

Bottom line, the IRS just wants the tax on these miles. They don't care who pays it, so long as they get their money.

MCI is just "spinning" (after all, no one LIES anymore).

Depends on what the meaning of "LIES" is !!

JonToners first paragraph is right on. If they are offering "free" miles, they should be just that...free. MCI should absorb all related costs (taxes, admin, the cost of the miles paid to the airline, etc). The only taxes we should have to pay are those that are levied directly on us by the government(such as taxes on a contest win). What a crock is right. I have just cancelled my service with MCI and will later today write to United's Mileage Plus and express my displeasure at being taking in by this outfit.

Geez, Pemex, I'd call that an honorable sacrafice of miles based on principle...but since the miles are NEVER posted without a fight, I don't thing you're giving up much more than a headache (see also UAMP Dining program) http://www.flyertalk.com/forum/wink.gif

In the long run, MCI stinks. Period.

'Course that depends on what your definition of is is

urp

Some smells rotten in the state of MCI (a play on Shakesphere's Hamlet.)

I did NOT sign up for MCI for many reasons but I'm wondering for those who did... did they send you a contract with 800 provisions (including presumingly a line that says "for ever 1000 miles we will be forced to impose an excise tax on the miles as a service.)

On my AT&T bill I pay like 75 cents as a special excise tax for long distance. It's spelled out and I got a warning of it in a mailing. DID MCI DO THIS???

Or in the ad did they have a little * or curley cue saying "For every 1000 miles we will have to charge 1 dollar tax."

Curious to know if MCI spell it out.

I don't know if it was spelled out, or if enough people are angry enough that they can file a suit (I can hear MCI saying "Oh it's only a dollar or so.) But it's the principal of the thing.

And Quiet Lion... you have a right to ROAR over this fee. (sorry about the cliche) Very very sneakly of MCI.

Again, I'm curious to know if MCI spelled it out. (NOT that I'll give up AT&T if they did!)

I would say an excellent OMNI worthy post by our friend the LION>




[This message has been edited by Catman (edited 04-21-99).]

TAANSTAAFL (There ain't no such thing as a free lunch), to quote Robert Heinlein. I for one was never under the impression that frequent flyer miles were 'free.' They are simply a rebate of some portion of a fee one is paying. Like it or not, as a customer if MCI (or anyone else) gives you miles or any other discount/rebate/reward, you will eventually pay for it in the form of higher prices--whether explicitly or implicitly.

I for one would prefer to have the cost itemized out as a tax rather than pay higher long distance rates (the other option), because then if I don't want the miles I myself recapture that money, rather than have MCI just pocket the difference. Thus, a user tax is actually quite fair in this respect. By having it itemized out I personally can calculate whether or not this cost is worth the benefit; if it is wrapped in to some other fee, this transparency is lost. That said, I will fault MCI for not disclosing what this line-item covers; they have had enough asterisks about the various Universal Service Fees, etc. that one more would hardly hurt!

I know we all like to think of FFB miles as 'free', but like it or not somewhere along the line we pay for them. Do you want to hazard a guess as to what ticket prices would do if all airlines collectively did away with loyalty programs (of course, none of us wants that, since the entire game is thatmost of us often fly on an expense account, in which someone else bears the direct cost and is usually less price-sensitive).

If you don't think the cost is worth the benefit, find a better package of services (as MileageAddict and others have done); that is what is wonderful about a market economy.

Apologies for the length of the message, and I too have complaints about MCI's customer service, but I also deal enough Russia at work that I have come to greatly value transparency and accountability--which is what MCI is in fact trying to promote with this practice.

Catman, thanks and MEOW... us cats have to stick together. Jon Toner and PremEx, thanks for the support.

MileageAddict, chalf and flingo, I agree someone has to pay for the miles... it's just that MCI was sneaking in the charge without telling anyone, and then having the effrontery to say that they were REQUIRED to pass on the charge to the customer which is a crock of cat biscuits!

Of course any company has a right to pass along anything it wants to consumers, unless they are being deceptive. I think that if a company says it will give you 1,000 miles, or 5,000 miles, or 25,000 miles for signing up for their service, that it is an unfair trade practice not to disclose this to the customer. It matters not a whit that they have filed a tariff with the FCC authorizing them to pass along the tax. If MCI posted a tariff saying it was going to charge $10,000 per frequent traveler mile, does anyone think they could get away with it by saying they had filed with the FCC?? Of course not. The charge needs to be disclosed to the consumer at the time the consumer decides whether or not to purchase the telephone service.
Ever since I got into a dispute with Hertz this summer about their passing along the 7.5% tax on 30 Skymiles on a rental, with the amount of the tax being five cents, I have puzzled about WHY they would want to alienate customers in roder to make a nickel? Since then, when I have rented from Hertz, I have just asked for Marriott counter points since there is not federal tax on those (yet). Most of the time, I just rent from a competitor. They have already lost the nickel many times over. They don't care.

I was surprised to see my line item for Federal, State and Local Surcharges had gone from .35 to 6.35. When I called MCI, I expected them to say, "That certainly is strange." Instead, three different reps tried to pass it off as a function of a) more long distance calls (from $7.50 to $12.00 -- I don't think so!); b) to the local phone company; c) to the government.

And worst of all, they had zero willingness to do anything to find out why it had shot up by 2000%. Finally, I found someone who said, "You also are taxed for your frequent flyer miles." BINGO! I knew what was going on! They charge .000916 dollars per mile to pay for taxes. It works out to $9.16 per 10,000 miles. Is it worth it? For the 10,000 miles, I think so, but I am out of here once that last 1000 bonus mile is posted.

Isn't it amazing how hard these companies try to get your long distance accounts (ATT with $100 checks, MCI with 10,000 mile awards) and yet they fail so miserably in dealing with their actual customers. All I ask is that I am told upfront what I am getting into. Don't give me some sneaky charges that are explained in some FCC Tariff filed in Washington DC.

I hear that you can tell your local phone company you don't want long distance and then just use the 10-10 dial around services. Maybe that's the way for me.

As for the argument that it's only fair that these companies bill us for what the charges are -- To be consistent with that logic, then we should also be billed for what it cost MCI to buy the miles from USAIR.

By the way, when was this tax implemented and what legislation was passed to enable it? I have read elsewhere on this site that the IRS is not planning to tax mileage awards, but this certainly seems like a tax to me.

As I understand it, all phone companies are
require to pass on the excise tax to their
customer as required by federal law. If so,
it does not make any scent to complain to MCI
for something that they are required to do.

While I'm no CPA (nor do I play one on TV), experience has shown me that the Feds, particularly the Dept. of Extortion doesn't care who is paying for something, so long as someone is.

When Congress chooses to tax, they greatly prefer indirect taxes (corporations) over direct taxes (income). It makes for a less hostile crowd back home.

Of course only an idiot thinks that companies simply pay these taxes from profits rather than passing them off to the customers. However logic does not penetrate politics easily.

My point? Congress would much rather tax miles a company awards (indirect) over raising the Federal Tax rate on long-distance calls. So if your tax burden on your phone bill (or anything else that itemizes tax) jumps up, look at the company's policies and procedures before assuming the Dept. of Extortion has changed its policies.

Yes, Excise Taxes must be paid by the consumer, but what would stop, for example, MCI from passing along its corporate tax burden DIRECTLY to customers under the guise of "Federal Tax"?

This topic comes up once every few months. Nobody seems to care that the real villain here is the IRS. Some companies (MCI, Hertz, Delta) will directly pass the tax to customers, others will pass it indirectly to customers.

Maybe we need a new newsgroup devoted to MCI bashing.

If MCI does not give me the miles promised or charges me for it one way or another I will reward them with switching over to Sprint!

$1 per 1000 miles is cheap if you think about it.

If I had access to a bargain like that I wouldn't hesitate in signing up. I'd have multiple telephone lines just for that purpose.

Where else can you get 25,000 miles for $US25?

I feels soooooooooo discriminated against down here in Australia. Stop wingeing , start switching and collect those miles!

cheers Peter

the small print of an AVIS advertisement (AARP, april-99) now says

"A frequent flyer tax applies to mileage awards".

[This message has been edited by Rudi (edited 05-01-99).]

Still waiting to hear back from them regarding this!

I just got a bill in the mail yesterday for $7+ in excise taxes after I disconnected from MCI. I had goten a $75 credit (Which was supposed to be cash) and got a 1000 mile skymile bonus for using my card. How did they get $7+ in taxes off 1000 miles. What is the excise tax rate on miles? (I don't think it's seven cents a mile)

This is deceptive and pathetic even if it is legal.

What is insane about this tax is:

- I'm a non-US Resident
- I use my calling card to phone the US
- I get sent invoices - seperate from the bill from the credit card for usually 7-8 cents - which it costs them 50 cents to mail.

The stuff they told you about not sending the bill for the miles until after the partner has confirmed credit is nonsence.

But now you've told me I'm rearmed and will be harassing the hell of out MCI about missing miles - which I've paid for!

Many taxes related to travel are charged to non-residents. Its much easier to tax someone who does not vote. Some of these taxes are really getting out of hand. Recently on my 2 day car rental, the taxes on the rental were close to the cost of one day rental.

I agree with pberrett--1000 miles for a dollar is a good deal. However, you're actually paying more than that.
Have you ever used your MCI calling card to place a call? I did last year--quite a few calls, in fact. When I got the bill it was well over $200 and I flipped. I switched from MCI that day and Never went back.
My husband's family lives in Europe. When we called there on MCI, we were paying about 95 cents a minute. Speaing with their customer service (after a 10 minuet wait), I was told that to get lower phone rates, I'd have to switch away from receiving miles.
I'm with AT&T now, not receiving miles, and happy in my phoning. I'm also able to get AT&T customer service on the phone after a minute or so, and no shifty pressing this and pressing that in order to get to a person.

Good grief! I need to learn to spell.

If you can't spell then edit is the next best thing. I edit a lot.

My MCI bill shows no such tax but I've only been with them three months.

However, on the subject of taxes and such, how about Pac Bell charging .50/month for what they call "Number Portability".

When asked, they will tell you that FCC authorized the charge to compensate them for the bookkeeping of reserving your number 'in case' you move to a different area code and 'in case' you want the same number. One more stipulation is that the number better not already be in use in the new area. If so, you don't get it....and of course you don't get your 'insurance premium' refunded.

It's only half a buck a month, but in a moderately sized city with only a million or so numbers, that's half a million dollars each month directly to the bottom line.

(I have some phone company stock available for those interested)

Hope the rest of your day is GREAT!!!

Chuck