Sprint and Verizon will pay $120 million in refunds or credits to wireless customers who were illegally billed hundreds of millions of dollars in unauthorized third-party charges.
The companies operated billing systems that allowed third parties to “cram” unauthorized charges on customers’ mobile-phone accounts and ignored complaints about the charges, the Consumer Financial Protection Bureau alleges.
The actions are being taken in coordination with the state attorneys general and the Federal Communications Commission. Under the proposed terms, the bureau will oversee $120 million in consumer refunds. The companies will also pay $38 million in federal and state fines.
Sprint’s and Verizon’s customers became victims by clicking on ads for “free” digital content such as ring tones or daily horoscopes, and were then charged without their consent. Many people didn’t know that third parties could add charges to their wireless bills. The illegal billing often continued undetected for months.
Sprint’s and Verizon’s billing systems invited illegal third-party charges and the companies did little or nothing to root them out, said Richard Cordray, director of the Bureau.
Sprint and Verizon also failed to properly track and respond to consumer complaints about these charges, while collecting hundreds of millions of dollars in revenue by serving as payment processors for these third-party companies, Cordray said. Sprint and Verizon received a 30 to 40 percent of every third-party charge.
Verizon and Sprint are the third and fourth mobile phone providers to enter into nationwide agreements to resolve cramming charges. Similar agreements were negotiated with AT&T in October of 2014 and T-Mobile in December of 2014.
