Verizon Wireless to Refund Customers Up to $90 Million

Verizon Wireless overcharged approximately 15 million customers for data services they didn't use and will begin refunding them-a move that could cost the carrier a reported $90 million.

Verizon Wireless improperly billed about 15 million customers on their wireless service statements over the last several years and now the nation's largest wireless carrier is beginning to reimburse them.

While the individual refunds are in the range of $2 to $6, Verizon said in an Oct. 3 statement, a New York Times report estimated the total damage to Verizon to be between $30 million and $90 million- though "people close to the settlement talks," which have been occurring with the FCC (Federal Communications Commission), expect the figure to be closer to $50 million.

The refunds are related to data-related charges of $1.99 that were levied against customers without data plans, either due to software on their phones or because they accidentally launched the browser, even when they quickly cancelled the command. Current customers will see the refunds credited to their statements, while former customers will receive refund checks.

"As we reviewed customer accounts, we discovered that over the past several years approximately 15 million customers who did not have data plans were billed for data sessions on their phones that they did not initiate," Mary Coyne, Verizon's deputy general counsel, explained in the statement. "These customers would normally have been billed at the standard rate of $1.99 per megabyte for any data they chose to access from their phones. The majority of the data sessions involved minor data exchanges caused by software built into their phones; others included accessing certain web links, which should not have incurred charges."

Verizon said both issues that instigated the charges have since been addressed.

"When we identify errors, we remedy them as quickly as possible," Coyne added. "Our goal is to maintain our customers' trust and ensure they receive the best experience possible."

According to the Times, over the last three years the FCC has received hundreds of complaints from Verizon Wireless customers who said they were charged for data use after inadvertently activating their phones' browsers. The FCC and several media outlets reportedly followed up on the charges, which Verizon denied in December 2009.

"In order to protect customers from minimal, accidental usage charges, Verizon Wireless does not charge users when the browser is launched, and opens to the Verizon Wireless Mobile Web homepage," Kathleen Grillo, a senior vice president for federal regulatory affairs at Verizon, told the FCC in a December 2009 letter, according to the Times.

In January, the FCC launched a formal investigation into the allegations, and it's now looking into just how long Verizon was in fact aware of the problem - and the overcharges. It can still charge the carrier with a formal Notice of Apparent Liability, a move Verizon appears to be trying to avoiding, in issuing the mea culpa.

"We're gratified to see Verizon agree to finally repay its customers. But questions remain as to why it took Verizon two years to reimburse its customers and why greater disclosure and other corrective actions did not come much, much sooner," Michele Ellison, the FCC's Enforcement Bureau chief, said in an Oct. 3 statement. "The Enforcement Bureau will continue to explore these issues, including the possibility of additional penalties, to ensure that all companies prioritize the interests of consumers when billing problems occur."

Verizon has additionally been investigated by the FCC for its early termination fees (ETFs), which it doubled in November 2009, raising the penalty it levied against customers who left their contracts early from $175 to $350. In December, several U.S. senators introduced legislation that would set limits on ETFs, and in January, the FCC launched a Consumer Task Force, the first action of which was to examine consumers' experiences in the wireless market.

On July 23, Verizon announced second-quarter revenue of $26.8 billion, though a loss of $198 million, largely due to several one-time issues. Cash flow for the quarter was up 76.7 percent year over year, and the carrier added 1.4 million net new customers.