The Consumer Financial Protection Bureau, with an assist from the FCC, has filed suit against Sprint for illegally billing wireless customers for tens of millions of dollars in third-party charges that were never authorized. Sprint disputes the charges. In fact the company says it is a leader in combating them.
In additiong to seeking consumer refunds for those hundreds of millions of dollars in unauthorized charges, the bureau will also seek a civil penalty.
CFPB Deputy Enforcement Director Jeff Ehrlich would not address whether actions against other wireless carriers or cable operators processing wireless payments was forthcoming. But he said the bureau clearly has jurisdiction over those other carriers. "We will take action against anyone who violates consumer financial protection laws," he said in a press conference with reporters after the announcement.
CFPB alleges that Sprint "crammed" the charges onto consumer bills and took its cut of the take. The bureau signaled it would hold all wireless carriers accountable for third-party charges their customers did not know about or authorize. It got an assist from the FCC's enforcement bureau in investigating the practices and
CFPB said that Sprint was an enabler of the illegal charges, giving aggregators "unfettered access to consumers' wireless accounts."
It alleges that Sprint violated the Dodd-Frank Act prohibition on unfair practices by allowing illegal charges, billing consumers for them without their consent, disregarding "red flags" about third parties, and ignoring consumer complaints.
"Sprint’s system attracted and enabled unscrupulous merchants who, in some cases, only needed consumers’ phone numbers to cram illegitimate charges onto wireless bills," said the bureau. "The charges ranged from one-time fees of about $0.99 - $4.99 to monthly subscriptions that cost about $9.99 a month. Sprint received a 30-40 percent cut of the gross revenue from these charges.
The bureau said many consumers were hooked with online ads that promised free digital content for entering their cell phone numbers, then charged for that content. Others just had "fabricated" charges placed on their bills by third parties that provided no goods or services.
"In the end, Sprint customers should not have been subjected to unauthorized charges and Sprint needs to be held accountable," said CFPB Director Richard Cordray in a press conference. "The company should have been responsive to consumers, curbed the illegal charges, and ending the damage done by cramming. Because Sprint did not deliver such common-sense protections, the Bureau is filing this lawsuit today to seek appropriate relief for Sprint’s misconduct and the harm it has done to consumers."
“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," said Sprint spokesperson Stephanie Vinge Walsh. "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.”
“Protecting consumers from unauthorized fees on their phone bills is a team effort," said an FCC spokesperson. "The Commission has a great working relationship with CFPB and state law enforcement partners. Together, we are pursuing joint enforcement actions to protect consumers from unauthorized fees on their wireless bills. Our agencies have agreed to continue our close cooperation on this and other cases on behalf of wireless customers nationwide.”
The FCC, Federal Trade Commission and 51 state attorneys general in October announced a $105 million settlement with AT&T over cramming. (http://www.multichannel.com/news/fcc/att-pay-105-million-cramming-settle...).
Wheeler at the time said that for too long consumers had been charged for services they did not want and did not authorize and that as many as 20 million people could have been affected annually by cramming across the spectrum of wireless carriers. He also said the "fraudulent" conduct "stops today for AT&T (Oct. 8) and to "stay tuned" for other wireless providers.