Verizon, Sprint Agree to Cramming Consent Decrees Totaling $158 Million
Verizon and Sprint agreed to consent decrees requiring them to pay $158 million in penalties and redress for wireless cramming, said the FCC, FTC, the Consumer Financial Protection Bureau and state attorneys general in a news conference Tuesday. Sprint will have to pay $68 million under the settlement, while Verizon will have to pay $90 million, said the consent decrees. Sprint and Verizon set up a third-party billing system that included consumers without their approval, allowed them to be billed for questionable services, and ignored “red flags” about the issue, Vermont Attorney General Bill Sorrell said Tuesday. Companies representing “98.5 percent of the wireless market” were charging consumers “for things they didn't buy,” said FCC Chairman Tom Wheeler. Last year regulators reached consent decrees with AT&T and T-Mobile addressing alleged cramming.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
The settlement agreements unveiled Tuesday include provisions that will bar the companies from engaging in cramming practices in the future, and will make changes to how third-party charges are displayed on customer bills. “You needed a forensic audit to turn these up,” said Maryland Attorney General Brian Frosh. “New behavior is being mandated for these four companies,” Wheeler said, referring to AT&T, Sprint, T-Mobile and Verizon.
The extra charges were applied to customer bills through premium text messages ranging from 99 cents to $14, or monthly subscription services, said CFPB Director Richard Cordray. The third parties sometimes supplied horoscopes or other small content in exchange for the charge, but would label it on bills as “data,” Frosh said. Some third-party providers would apply the charges after providing no services at all, without contacting the consumer, the attorneys general said.
Under the consent decree, Verizon has to make $70 million of its settlement available for consumer redress, while Sprint must do the same with $50 million of its settlement, Wheeler said. The settlements require the companies to cease offering third-party premium text message charges, obtain consent from consumers before allowing third party charges, offer a free service to consumers to block third-party charges, and regularly report to the FCC on the issue, Wheeler said.
Though Enforcement Bureau Chief Travis LeBlanc said all four companies cooperated with investigators and came to the negotiating table, Sorrell said the process was more contentious. He said negotiations were “long and arduous” and involved significant “pushback” from the wireless carriers. A Sprint spokeswoman said the company voluntarily ceased offering premium text message charges to its customers in 2013. “Sprint was an industry leader in enacting rigorous safeguards to protect customers against unauthorized billing,” the spokeswoman said.
A Verizon spokesman said the company ceased allowing third parties to put premium text message charges on bills "well before any government action." Commissioner Mignon Clyburn praised Wheeler and LeBlanc for "sending a powerful message" that cramming won't be tolerated by the FCC.