Verizon and Sprint will refund customers $120 million after sticking them with unauthorized third-party charges in a practice known as “cramming.”
According to the Consumer Financial Protection Bureau, the wireless carriers will also pay $38 million in federal and state fines.
“Sprint and Verizon had flawed billing systems that allowed merchants to add unauthorized charges to wireless customer bills,” CFPB Director Richard Cordray said in a statement. “Consumers bore the brunt of those charges and ended up paying millions of dollars while the companies reaped profits. Today’s actions will put $120 million back into the pockets of harmed consumers and require these companies to improve their billing practices going forward.”
The CFPB alleges that the wireless carriers not only allowed the bogus third-party fees, but they ignored customers’ complaints about the extra charges, which ranged from one-time fees of 99 cents to monthly charges of $9.99.
Verizon and Sprint collected a 30-40 percent cut of the gross revenue from the charges, which were incurred from 2004 to 2013.
According to the CFPB, most consumers who ended up victims of the cramming charges were targeted online.
Consumers 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. Many others simply placed fabricated charges on bills without delivering any goods or communicating with consumers.
In an email to The New York Times, a Verizon spokesman said that the carrier had quit including cramming charges on customers’ monthly bills.
“Well before any government action, Verizon Wireless stopped allowing companies to place charges for premium text message services on customers’ bills,” the spokesman said.
According to a statement from Sprint, the company “returned tens of millions of dollars long before the government initiated its investigation of our industry.”