CFBP claims illegal billing activity; FCC yet to move on potential fine
The Federal Communications Commission has yet to move on reported plans to fine Sprint $105 million related to overcharging customers, but the Consumer Financial Protection Bureau has moved forward with a lawsuit against the carrier related to the claims.
In its lawsuit, CFBP alleges that through the end of 2013, Sprint allowed third-party content providers to charge Sprint customers for services they did not sign up for and ignored complaints about those charges. The independent government agency, which was created in 2010 from the Dodd-Frank Wall Street Reform and Consumer Protection Act, is seeking an unspecified amount in refunds and penalties claiming Sprint violated tenants of the act.
“(W)e are suing Sprint for allowing illegal charges to be crammed onto consumers’ wireless bills,” said CFPB Director Richard Cordray, in a statement. “Consumers ended up paying tens of millions of dollars in unauthorized charges, even though many of them had no idea that third parties could even place charges on their bills. As the use of mobile payments grows, we will continue to hold wireless carriers accountable for illegal third-party billing.”
The CFBP complaints include claims that Sprint allowed third parties to illegally charge customers through the carrier’s billing platform; automatically billed customers for illegal charges without their consent; disregarded “red flags” that illegal charges were being processed through Sprint’s billing system; and ignored consumer complaints about illegal charges.
“As a result, Sprint’s wireless customers – many of whom did not know that third parties could place charges on their bills – incurred millions of dollars in illegitimate charges,” CFBP noted. “Sprint, in contrast, profited handsomely from its system, collecting hundreds of millions of dollars in revenue, according to the bureau’s complaint.”
The organization also states that it worked with the FCC and received “valuable assistance” from the FCC Enforcement Bureau in connection with the lawsuit, although the lawsuit was “not a finding or ruling that the defendant has violated the law.”
Reports earlier this week indicated that the FCC was looking to fine Sprint $105 million related to claims of “bill cramming,” noting that the allegations were currently in front of FCC commissioners. While the fine has yet to be handed down, Sprint did release a statement regarding the CFBP lawsuit:
“We are disappointed that the CFPB has decided to target Sprint on this issue, and we strongly disagree with its characterization of our business practices. Sprint took considerable steps to protect wireless customers from unauthorized third-party billing and is an industry leader in proactively preventing unauthorized charges. We recognize this is an important issue for our customers, and we consistently have encouraged any customers who think they may have incurred an unauthorized third-party charge on their phone bill to contact Sprint to resolve the issue.”
Sprint initially extended billing options to third parties in 2004, with Disney as its first big-name partner.
The Federal Trade Commission earlier this year accused T-Mobile US of similar “bill cramming,” claiming the operator raked in “hundreds of millions of dollars” from the practice. In its complaint, the FTC said T-Mobile US acted as the billing agent for such services, which in some cases had refund rates as high as 40%. The FTC claims such a high refund rate was “an obvious sign to T-Mobile that the charges were never authorized by its customers,” and that internal documents showed that the carrier had received a “high number of consumer complaints at least as early as 2012.”
T-Mobile US claimed the accusations were “unfounded and without merit,” though prior to the FTC action T-Mobile US announced it would begin reaching out to customers that may have been incorrectly charged for third-party, premium messaging services that the carrier used to allow access to through its billing platform. T-Mobile US announced last November that it would stop supporting such billing arrangements.
The premium text message services market has gained a reputation as being filled with fraudulent billing schemes, which wireless carriers have tried to combat.
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