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Verizon Wireless and Sprint Corp. will pay settlements of $90 million and $68 million respectively to U.S. regulators after government investigations determined that the two companies crammed customer phone bills with unauthorized charges and then ignored complaints and requests for refunds.
The actions were announced May 12 by the Federal Communications Commission’s Enforcement Bureau, marking the agency’s third enforcement action since October 2014 against U.S. phone carriers for bill cramming. With the latest case, the FCC has now fined all four major U.S. carriers, Verizon, AT&T, Sprint and T-Mobile, a total of $353 million in fines for the practice.
“For too long, consumers have been charged on their phone bills for things they did not buy,” FCC Chairman Tom Wheeler said in a statement. “We call these fraudulent charges ‘cramming,’ and with today’s agreements we are calling them history for Verizon and Sprint customers.”
The FCC settlement decrees that Verizon and Sprint lay out plans for fines, penalties and direct-to-consumer payments that the companies must now pay. Out of its $90 million settlement, Verizon will have to pay a minimum of $70 million to fund a consumer redress program, $16 million in fines to state governments participating in the settlement and a $4 million fine to the U.S. Treasury, according to the FCC. Sprint’s $68 million settlement will include a minimum of $50 million in payments to consumers, $12 million in fines to state governments that participated in the settlement and a $6 million fine to the U.S. Treasury. The settlements were negotiated in coordination with the Consumer Financial Protection Bureau and the attorneys general of all 50 states and the District of Columbia, according to the FCC.
Past or current Verizon and Sprint customers who were charged for such unauthorized bills should review their old bills and contact their phone carriers and file refund requests.
“Consumers rightfully expect their monthly phone bills will reflect only those services that they’ve purchased,” Travis LeBlanc, the chief of the FCC’s Enforcement Bureau said in a statement. “Today’s settlements put in place strong protections that will prevent consumers from being victimized by these kinds of practices in the future.”
In addition to the settlements and fines, Verizon and Sprint must now adopt practices that will prevent similar unauthorized charges from ever ending up on customer bills in the future, according to the FCC. The companies will no longer be allowed to offer commercial third-party premium short messaging services charges and will have to obtain informed consent from customers prior to allowing any third-party charges on customer bills, the settlements state. Verizon and Sprint will also have to offer a free service for customers to block all third-party charges and are required to regularly report to the FCC about their compliance and about refunds they make to their customers.
Consumers were being hit with monthly charges for the unordered third-party premium text messaging services ranging from 99 cents to $14, with a typical fee of $9.99 per month, according to the FCC. For the companies, the fees were lucrative, with Verizon keeping 30 percent or more of each third-party charge that it billed, while Sprint received approximately 35 percent of its collected fees, the FCC reported.
Many consumers complained about the unauthorized charges to the FCC, other government agencies and to the carriers, but their complaints often went unheeded, 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 agency explained.
The placement of unauthorized charges and fees on consumers’ telephone bills is against the law under the U.S. Communications Act.
In December 2014, the FTC announced a similar settlement with T-Mobile USA that required the carrier to pay at least $90 million for their past cramming practices, according to an earlier eWEEK report. T-Mobile agreed to pay at least $67.5 million in direct refunds to consumers who file claims for phone bill charges that they did not authorize, as well as $18 million in fines to the 50 states and the District of Columbia, as well as a $4.5 million fine to the U.S. government.
The fines against T-Mobile came two months after a similar case by the agencies against AT&T Mobility, when that phone carrier was fined $105 million in October for cramming the bills of its own customers. The $105 million fine included $80 million for direct refunds to customers as well as $25 million in penalties to be paid to the FCC, FTC and attorneys general across the United States. It still stands as the largest fine in the history of the FCC so far, according to the agency.