Mobile giants Verizon Wireless and Sprint agreed to pay $90 million and $68 million respectively for “cramming” the cell phone bills of their consumers, according to a settlement announced on May 12.
The dispute arose when some customers discovered that they were being billed $9.99 a month for services which they hadn’t signed up for, such as daily horoscopes, trivia and sports scores.
According to federal regulators, Verizon and Sprint partnered with third-party vendors that sell premium text messaging services, but in many cases, consumers aren’t aware that they are signing up for those extra services in the first place. Some of the merchants don’t even need authorization from consumers to bill them for services.
“The lack of oversight by Sprint and Verizon allowed the vendors to have nearly unfettered access to consumers’ wireless accounts,” said the Consumer Financial Protection Bureau in a statement on May 12. “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.”
In addition to being unexpected, the billing for premium text messaging services employed vague wording. Regulators warned consumers to watch out for generic sounding fees using words such as: Min. Use Fee, Activation, Member Fee or Subscription.
Both mobile providers have cramming refund programs that allow consumers to submit claims for fraudulent charges. After consumers file those claims, the companies let them know whether or not they are eligible for refunds. However, numerous consumers complained to federal regulators that the carriers had refused to refund charges, leading regulators to launch an investigation.
As a result of the settlement, more Verizon and Sprint customers are now eligible for refunds. At least $70 million of the $90 million Verizon must pay will go toward a program designed to refund customers who were saddled with illegitimate charges.
Both companies released statements on May 12 stating that they had stopped allowing premium text messaging before the federal investigation had begun.
Image source: Mike Mozart/Flickr