Verizon and Sprint are accused of illegally billing their customers more than $100 million in unauthorized third-party charges. According to the Consumer Financial Protection Bureau (CFPB), Verizon and Sprint consumers that clicked on free digital content, like daily horoscopes or ring tones, were charged without the customer knowing they were being charged and without their consent.
CFPB announced settlements and filed orders in federal courts against both companies on May 12, charging them with “cramming” unauthorized charges on customers’ mobile-phone accounts.
CFPB Director Richard Cordray explained the protection agency’s actions.
“Sprint and Verizon had flawed billing systems that allowed merchants to add unauthorized charges to wireless customer bills. 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.”
According to CFPB, Verizon and Sprint’s billing system allowed vendors the ability and access to charge customers without their knowledge.
In addition, CFPB reports how Verizon and Sprint’s premium billing systems attracted merchants wanting to profit by victimizing their customers.
“The billing systems for premium messages attracted and enabled unscrupulous merchants who, in some cases, only needed consumers’ phone numbers to cram illegitimate charges onto wireless bills. The charges ranged from one-time fees of about $0.99 – $14.99 to monthly subscriptions that cost $9.99 a month. The companies received a 30-40 percent cut of the gross revenue from these charges.”
Most Verizon and Sprint customers were targeted online. One way customers became victims was by clicking on ads that sent them to a website. Once they got to the website, the customer would be asked to enter their cell phone number.
CFPB explains some of the merchants’ tricks.
“Some merchants tricked consumers into providing their cell phone 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.”
If the Verizon and Sprint proposed consent orders are approved by the courts, Verizon will have to refund consumers $70 million, and Sprint will have to pay $50 million in customer refunds.
In addition, both companies will have to pay $38 million in federal and state fines.
The Federal Communication Commission (FCC) and state attorneys general worked with the Consumer Financial Protection Bureau in this Verizon and Sprint unlawful third-party billing practice.
[Featured image via Spencer Platt / Getty Images]