Verizon, Sprint Pay $158 Million to Settle Cramming Charges

Agree to compliance regime
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On the same day it announced it was buying AOL, Verizon agreed to pay $90 million to settle an FCC investigation into mobile cramming charges. Sprint is paying $68 million to resolve a similar investigation, in which the FCC, Federal Trade Commission and Consumer Financial Protection Bureau, concluded that the companies had billed their customers millions in unauthorized third-party premium text messaging services.

Verizon got almost a third of each charge (30%) while Sprint got more, at 35%, according to the FCC. "Customers who called to complain were often denied refunds, and yet, when the FCC requested proof that customers had authorized charges, the carriers were unable to prove that these services were ever requested," the commission said.

The payments will be divvied up, with Verizon’s $90 million settlement including at least $70 million going to refund consumers, $16 million to state governments participating in the settlement—all 50 did—and $4 million as a fine to the Treasury. Sprint’s $68 million breaks down as $50 million to consumers, $12 million for state governments, and $6 million to the Treasury.

In addition, Verizon and Sprint agreed to:

•             "no longer offer commercial third-party PSMS charges"

•             "obtain informed consent from customers prior to allowing third-party charges"

•             "clearly and conspicuously identify third-party charges on bills"

•             "offer a free service for customers to block all third-party charges"

•             "regularly report to the FCC on compliance and refunds to customers"

"With today’s two cramming cases, the FCC, working together with the Consumer Financial Protection Bureau, the Federal Trade Commission, and states’ attorneys general has brought a total of $353 million in penalties and restitution against the U.S.’s four largest wireless carriers, structuring these settlements so that $267.5 million of the total will be returned to affected customers," the FCC said in announcing the settlements.

“For too long, consumers have been charged on their phone bills for things they did not buy,” said FCC chairman Tom Wheeler in a statement. “We call these fraudulent charges ‘cramming,’ and with today’s agreements we are calling them history for Verizon and Sprint customers.”

“Well before any government action, Verizon Wireless stopped allowing companies to place charges for premium text message services on customers’ bills," the company said in a statement. "Today’s settlement reflects Verizon’s continued focus on putting customers first. Customers who believe they were billed improperly for these services may seek a refund. They can visit www.cfpbsettlementverizon.com for more information."

"Verizon Wireless rigorously protected its customers from unauthorized third-party charges for premium text message services.  Verizon thoroughly vetted the companies that provided these services and terminated providers who did not comply with our industry-leading practices.  Customers also benefitted from a broad policy of providing refunds to those who claimed that a third-party charge was not authorized.”

"I applaud Chairman Tom Wheeler and Enforcement Bureau Chief Travis LeBlanc for sending a powerful message that we will not tolerate cramming of wireless consumers," said FCC commissioner Mignon Clyburn. "Cramming, which occurs when a carrier charges consumers for services they did not authorize, is an unjust and unreasonable practice which warrants a swift and strong response. Since January 2014, the Commission has taken 19 enforcement actions totaling $391 million for cramming violations.... This latest victory for consumers involved coordination with the Consumer Financial Protection Bureau, the Federal Trade Commission, and the attorneys general for all 50 states.  I also commend those agencies for their pro-consumer efforts."

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