TELECOM Digest Editor noted in response to Lisa Hancock's comments:
As mentioned, telephone rate structures and marketing practices varied significantly from place to place. The Bell System took great pride in being "standardized", but that seems to be more technically than administratively. I suspect some practices were actually inherited from the very early days of service.
That was basically correct, _IF_ you remembered to disconnect the bootleg phone _and_ hide all evidence of its wiring. Many people forgot.
As to disconnecting the ringer ... Bell supposedly would test the resistance on your line and be able to tell if you had more than authorized sets on it from the ringers' load. Bell Labs Record journal announced an automated machine that would test all CO lines to search that out. How much they bothered to do that in practice I don't know. I know of people who got caught per above wiring mess-up, but not by extra ringers.
The problem with such phones was that a lot of people had no idea what they were doing, even though phone wiring is pretty simple. Sometimes you needed to hook up the yellow (third) wire. Party lines could be tricky. Sometimes the bootleg phones were junk.
While Bell hated the bootleg extensions, I don't know if they ever carried through with their threats to cut off service. Maybe if someone repeatedly refused to cooperate, as some people would purposely do, they'd cut off service.