The Consumer Financial Protection Bureau has filed suit against the country's third-largest wireless carrier for alleged phone bill cramming.
The Consumer Financial Protection Bureau says Sprint has cost consumers tens of millions of dollars in unauthorized third-party charges.
According to a lawsuit filed by the CFPB, Sprint’s billing system gave third parties “virtually unfettered access” to the accounts of its customers, which allowed those parties to “cram” millions of dollars of unauthorized charges onto wireless bills between 2004 and December 2013.
Sprint outsourced payment processing for … digital purchases to vendors called “billing aggregators” without properly monitoring them.
The lack of oversight gave aggregators near unfettered access to consumers’ wireless accounts. Sprint’s system attracted and enabled unscrupulous merchants who, in some cases, only needed consumers’ phone numbers to cram illegitimate charges onto wireless bills. The charges ranged from one-time fees of about $0.99 to $4.99 to monthly subscriptions that cost about $9.99 a month. Sprint received a 30 to 40 percent cut of the gross revenue from these charges.
The press release said most of the affected Sprint customers were targeted online.
Customers clicked on ads that brought them to websites asking them to enter their cellphone numbers. Some merchants tricked consumers into providing their cellphone numbers to receive “free” digital content and then charged for it. Other merchants simply placed fabricated charges on people’s bills without delivering any goods or even communicating with them.
According to Reuters, Sprint is disputing the allegations.
“We strongly disagree with [the CFPB’s] characterization of our business practices,” Sprint spokeswoman Stephanie Vinge Walsh said in a statement.
“It appears the CFPB has decided to use this issue as the test case on whether it has legal authority to assert jurisdiction over wireless carriers,” she said in an email.
According to the CFPB, Sprint, the third largest wireless carrier in the U.S., is accused of violating the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition on unfair practices in these ways:
- Allowing illegal third-party cramming charges. Sprint’s payment and billing system allowed third parties to easily include unauthorized fees on their customers’ bills.
- Automatically billing for unauthorized charges. Sprint automatically enrolled customers in third-party billing, without their knowledge, enabling phony fees to slip by customers because they weren’t aware they should be looking for them.
- Turning a blind eye to red flags about third parties. “Sprint continued to outsource to billing aggregators despite lawsuits about cramming against the very same aggregators that Sprint used,” the CFPB said.
- Disregarding customer complaints about illegitimate charges. Sprint didn’t track customer complaints about the phony charges, nor did it provide quick remediation to consumers impacted by the unauthorized fees, the agency said.
The CFPB is seeking refunds for affected consumers, as well as penalties.
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