Robocalls Scams are on the Rise : The Indicator from Planet Money Americans get billions of robocalls every month. They are almost universally despised, so how have they managed to stick around? The answer lies in the economics, of course.
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Rise of the Robocall

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Rise of the Robocall

Rise of the Robocall

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UNIDENTIFIED PERSON #1, BYLINE: NPR.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

STACEY VANEK SMITH, HOST:

This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith. And today's indicator is...

UNIDENTIFIED PERSON #2: If you're interested in renewing your auto warranty now, please press five now.

VANEK SMITH: ...A robocall. Walt Hickey is the senior editor for data at Insider, and he got this particular robocall many, many times.

WALT HICKEY: This was one of those wonderful situations where the story was basically vengeance. I had been getting...

VANEK SMITH: (Laughter).

HICKEY: ...Pretty much unrelenting robocalls for months on end. Constantly, I was getting warned about the warranty on my automobile is expiring. I don't have a car.

VANEK SMITH: Cellphone spam calls have exploded in recent years. In 2019, Americans got nearly 60 billion robocalls. That is almost 200 robocalls per person. And as Walt was fielding all these millions of robocalls, he started to think about why he was getting them. And he got more and more confused.

HICKEY: It just - it didn't make sense to me. Everything that we see in the economy these days is, like, getting things more optimized, getting things more targeted, getting things more efficient. And this just seems like the worst possible way to scam somebody - calling people daily to remind them of a warranty that they don't actually have.

VANEK SMITH: Walt thought, spam calls are just so old-school, so inefficient. They're like junk mail. And, like, aren't we past this? I mean, don't companies use big data to get the exact perfect ad in front of the exact perfect person at the perfect moment? I mean, we can do that now. So why would advertisers, even scammers - why would they spend their money on robocalls?

HICKEY: So the economics are where it becomes really clear why this is such a pervasive problem.

VANEK SMITH: The economics - OK, so the first thing to know is that these spam calls are technically illegal. And the companies that make spam calls are generally scammers. Maybe they are selling something that doesn't actually exist. Maybe they're selling something that's really crappy. In any case, scammer-type companies are the ones making robocalls, and they hire these robocallers. And the robocallers have this technology which can dial thousands of numbers every minute for pretty cheap.

HICKEY: You know, Message Communications, Inc. will sell 125,000 minutes of robocalls for $875.

VANEK SMITH: Those 125,000 minutes get you a ton of robocalls because the average robocall is really short - only about three seconds long.

HICKEY: You can get 2.5 million calls for $875, which is just...

VANEK SMITH: Wow.

HICKEY: ...Twenty-eight spam calls per cent.

VANEK SMITH: I could have - I mean, like, I could actually afford that. So I could afford to have America spammed with like...

HICKEY: Oh, yeah.

VANEK SMITH: You know, you guys should listen to THE INDICATOR.

HICKEY: You could ruin 2.5 million afternoons for, like, 875 bucks.

VANEK SMITH: Walt says 99.5% of these calls will go nowhere. They're hang-ups. But one-half of 1% of people will not hang up right away. They will keep listening. Maybe they think, wait; is my car warranty about to expire? Or, you know, I really should get a car warranty. Or maybe they just don't hang up fast enough. These are called leads, and a small fraction of those leads will stay on the call long enough to be transferred to a human being called a closer, who will, from the perspective of the scammer, hopefully make a sale. So two things have to happen here to make the economics work for the robocaller and the scammer. First of all, you have to make a lot of calls.

HICKEY: There was one of them that carried out 2.6 billion outbound calls over the course of a 20-minute period.

VANEK SMITH: Whoa, really? - one robocaller.

HICKEY: One company.

VANEK SMITH: Walt points out in this case, the scammer got nearly 13 million leads or potential customers, but they had to bug billions of people to get there. Also, the leads aren't free. The robocaller charges a premium to the scammer for every lead, around 6- or $7 apiece. So in the case of the 2.6 billion calls that yielded 13 million leads, the company paid $78 million. And, of course, only a small fraction of those leads will end up in an actual sale. So to make it worth their while, the scammers need to squeeze a lot of money out of the people who do fall for their scam. And Walt says that is where the actual products being sold come in.

HICKEY: They like doing these businesses that are recurring payments - magazine subscriptions, insurance. Maybe they're difficult to cancel.

VANEK SMITH: Oh, like a car warranty.

HICKEY: Exactly. The FTC did a big bust on alarm system companies back in, like, 2014. And if you think about it, home security is a perfect example. You don't know how good it is unless you get robbed. And as a result, you're just paying recurring, maybe sometimes high fees to these companies to do it. They're able to get very high amounts out of a very low number of marks, and that pays for the whole kind of system.

VANEK SMITH: Walt says most of these marks are older people or people who are mentally or emotionally vulnerable in some way. And a lot of times, these people don't have a lot of money. So the robocallers just bleed them out a bit at a time - $50 a month, $75 a month, $200 a month.

(SOUNDBITE OF MUSIC)

VANEK SMITH: In fact, this whole system, these incessant calls going out to billions and billions of people - it is all crafted to find a small number of vulnerable people and to take advantage of them. So how is this allowed to happen?

HICKEY: The problem is is that the robocallers have just become so progressive and bigger, and the justice system in the United States is giving them cover to get away with it.

VANEK SMITH: After the break, the story of how that happens and what this year holds for the dreaded robocall.

HICKEY: The future of the robocall is going to be decided this year.

(SOUNDBITE OF MUSIC)

VANEK SMITH: For a long time, spam calls on cellphones weren't actually such a big problem. That all changed pretty recently, says Walt Hickey.

HICKEY: So in late 2015, they were logging less than a billion robocalls per month. And then in 2018, it just takes off like a rocket. And by the end of 2018, you're looking at about 5 billion robocalls a month.

VANEK SMITH: Just to put a finer point on this, there are only, like, 7.5 billion people on the Earth. And there were 5 billion robocalls in 2018 in just the U.S. in just one month. And Walt says part of the reason for this explosion of robocalls can be traced back to this court case - Spokeo, Inc. v. Robins. Spokeo was not a robocaller, but the case related back to robocalls because the court decided that just annoying someone or irritating someone didn't constitute a crime. And this meant the ability to sue robocallers got a lot harder.

HICKEY: And so all of a sudden, the primary legal risk was not there anymore.

VANEK SMITH: And so 5 billion robocalls - and Walt says 2021 is gearing up to be a bumper year for robocalls because times of economic distress are boom time for scammers.

HICKEY: There's a lot of economic desperation going on out there. As folks start getting chased down for debts that they incurred over the course of the pandemic, as the economic situation remains rocky and people are still in a state of mind where, oh, I might owe a warranty - or, oh, I can't afford an issue with my car. I should get one.

VANEK SMITH: So economics and our current economy and the law - they are all on the side of the robocaller. But Walt says robocallers have a pretty powerful enemy - anger. Walt says hatred of robocalls unites America, and some of this hatred runs deep.

HICKEY: Robocalls may have ticked me off, and they probably have ticked you off. But there are some people who have approached the robocall problem with a monomaniacal goal of just trying to scrub these off the face of the Earth.

VANEK SMITH: (Laughter).

HICKEY: And they've made a ton of progress.

VANEK SMITH: Some of that progress, says Walt, is political. So earlier this month, the FTC shut down a big robocall charity scam. And Walt says government crackdowns like this are one big way that robocallers might be deterred. There's also this new technology that might help phone carriers either block spam calls from ever getting to your phone or at least flagging calls that look a little sketchy.

HICKEY: Basically suss out which calls are coming from bad numbers because...

VANEK SMITH: Is this why I sometimes get calls from spam risk?

HICKEY: Yes.

VANEK SMITH: I'm very popular with spam risk, by the way.

HICKEY: Yeah, yeah. I mean...

VANEK SMITH: They won't stop calling (laughter). Finally, says Walt, the Supreme Court is expected to rule on a case this year that has big robocall implications. And depending on what it decides, spam risk might ghost or it might start calling...

(SOUNDBITE OF MUSIC)

VANEK SMITH: ...Again and again and again and again. This episode of THE INDICATOR was produced by Emma Peaslee and fact-checked by Sam Tsai (ph). It was edited by Jolie Myers, and THE INDICATOR is a production of NPR.

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