Verizon Agrees to Pay Treasury $25 Million to Settle Mystery Fees

Penalty comes in addition to $52.8 million owed to customers

By John Eggerton -- Broadcasting & Cable, 10/28/2010 2:49:05 PM

Verizon Wireless has agreed to refund $52.8 million to customers and pay a penalty of $25 million to the U.S. Treasury to settle a ten-month FCC investigation into overcharges on its bills, the FCC said Thursday.

That $25 million was the biggest such payment in FCC history according to the Enforcement Bureau.

FCC Enforcement Bureau Chief Michele Ellison said she was "gratified" with the company's cooperation and said it was "taking the high road" with the settlement. "Today's settlement requires Verizon Wireless to make meaningful business reforms, prevent future overcharges, and provide consumers clear, easy-to-understand information about their choices," she said in a statement.

The FCC confirmed earlier this month that it was investigating the company for "mystery fees that appeared on Verizon Wireless bills costing over 15 million Americans tens of millions of dollars," Ellison said at the time.

Verizon had already identified the over-$50 million in overcharges, saying it would be applying credits to their accounts over "mistaken past data charges."

But the FCC had said a penalty was still on the table--which turned out to be the $25 million--and it was concerned that it had taken Verizon two years to discover the problem.

Mary Coyne, Verizon Wireless Deputy General Counsel, has said in announcing the Verizon refunds that steps have been taken to prevent a repeat performance, but suggested the refunds were hardly unique. "Verizon Wireless issue credits to customers from time to time based on regular review and monitoring," she said.  "When we identify errors, we remedy them as quickly as possible. Our goal is to maintain our customers' trust and ensure they receive the best experience possible."

The FCC said Thursday that the "erroneous fees" were triggered by data transfers triggered automatically by games, failed attempts to access data when there was insufficient network coverage, and third-party transfers.

As part of the settlement, Verizon has agreed to stop charging the fees, immediately repay the 15 million customers, and improve its customer service. It must also create a "data charge" task force and submit periodic reports to the commission on the status of its refund and its steps to insure compliance with the settlement. Verizon customers, in addition to those covered by the estimated $52.8 million refund, will also have the right to appeal their absence from the repayment, meaning the refund is not capped.

The investigation is part of the FCC's avowed emphasis on consumer issues, including so-called "bill shock," or fees that come as a surprise to customers.