Wednesday, May 13, 2015
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Sprint and Verizon to Pay $158 Million for ‘Cramming’
From Staff and Wire Service Reports
Verizon Wireless will pay $90 million and Sprint $68 million to settle charges that the mobile giants allowed phony charges on their customers’ monthly bills so they could keep a cut of the profit, federal regulators said yesterday.
The state of California will receive nearly $1.3 million, Attorney General Kamala Harris said in a release, in which she urged the companies’ California customers to file claims if they were billed for the charges.
The two mobile providers had partnered with third-party vendors that sell premium text messaging services, such as daily horoscopes, trivia and sports scores. But consumers who hadn’t signed up for the services were being billed anyway, typically about $9.99 a month, according to the Federal Communications Commission, Federal Trade Commission and state attorneys general.
The practice is commonly referred to as “cramming.” Regulators said they launched an investigation after receiving numerous complaints that the carriers had refused to refund the charges.
Both companies said in statements emailed to reporters yesterday that they had stopped allowing premium text messaging before the government investigation began. Sprint spokesman Jeffrey Silva said the company had already returned “tens of millions of dollars” to its customers.
“This settlement gives our customers who believe they were wrongfully billed for (premium text messaging) services the ability to get a refund, and allows Sprint to continue to focus on enhancing the customer experience,” Silva wrote.
Verizon Wireless spokeswoman Debra Lewis said the settlement “reflects Verizon’s continued focus on putting customers first.” She added that the company had “rigorously protected” its customers from unauthorized charges.
“Verizon thoroughly vetted the companies that provided these services and terminated providers who did not comply with our industry-leading practices,” Lewis wrote.
According to the FCC, consumers who called the carriers to complain were denied a refund even though the carriers were unable to provide proof that the customer had authorized the charges. At the same time, Verizon kept at least 30 percent of each billing charge, while Sprint kept about 35 percent.
The FCC, FTC and other regulators cheered the move as a signal that cramming would no longer be tolerated. Last year, T-Mobile agreed to pay $90 million for cramming while AT&T Mobility agreed to a $105 million settlement.
The investigation drew in the Consumer Financial Protection Bureau, as well as law enforcement in every state.
Harris explained that California will receive $549,731.29 in the Sprint settlement, and $733,298.41 in the Verizon settlement.
“To boost their profits, Sprint and Verizon deceived consumers and added unauthorized charges to their monthly bills,” the attorney general said. “This settlement holds Sprint and Verizon accountable for their actions, ends these bad business practices and refunds consumers.”
Of the settlement totals, Sprint and Verizon are required to provide $50 million and $70 million, respectively, to consumers who were victims of cramming. Verizon will pay $16 million to states, and $4 million in fines. Sprint will pay $12 million the states and $6 million in fines.
Consumers can submit claims by visiting www.SprintRefundPSMS.com and/or www.CFPBSettlementVerizon.com, Harris said. Consumers who have questions about the redress programs can visit the program websites or call (877) 389-8787 (Sprint), and/or (888) 726-7063 (Verizon), she added.
Like the previous settlements, the agreements provide that the carrier must obtain consumers’ express consent before billing for third-party charges, give consumers an opportunity to obtain a full refund or credit when they are billed for unauthorized third-party charges, inform customers when they sign up for services that their mobile phone can be used to pay for third-party charges and explain how those charges can be blocked if the consumers do not want to use their phone to pay for third-party products, and The carriers must present third-party charges in a dedicated section of consumers’ mobile phone bills.
New York Attorney General Eric Schneiderman said he estimates that about 2 million New Yorkers will be eligible for refunds. Maryland Attorney General Brian Frosh said consumers still need to remain vigilant of scams.
“It’s becoming more and more common to use our phones and not our wallets when making purchases,” Frosh said. “As mobile payment systems become more prevalent, scammers will attempt to find ways to manipulate these applications.”
Copyright 2015, Metropolitan News Company