Sprint Corporation and Cellco Partnership d/b/a Verizon Wireless will pay $158 million to resolve charges that the companies engaged in mobile cramming.
Mobile cramming is a practice in which cell phone providers place unauthorized third-party charges on consumers’ bills.
One common cramming charge is a $9.99-per-month premium text messaging subscription service (PSMS) for horoscopes, trivia, sports scores or other information that consumers often never requested.
The State Attorneys General and federal regulators allege that cramming occurred when Sprint and Verizon placed charges from third parties on consumers’ mobile telephone bills without the consumers’ knowledge or consent.
Sprint and Verizon are the third and fourth mobile telephone providers to enter into a nationwide settlement to resolve allegations regarding cramming.
New York Attorney General Eric Schneiderman announced similar settlements with AT&T in October of 2014 ($105 million) and T-Mobile in December of 2014 ($90 million).
All four mobile carriers announced that they would cease billing customers for commercial PSMS in the fall of 2013.
“It’s both unfair and illegal to charge consumers for services they did not request, a practice that Sprint and Verizon engaged in over several years,” Schneiderman said. “Under today’s settlement, an estimated 2 million New Yorkers will be eligible for refunds and both companies have committed to ending this deceptive business practice.”
Under the terms of the settlements, Sprint will pay $68 million and Verizon will pay $90 million.
Of these amounts, Sprint and Verizon are required to provide $50 million and $70 million, respectively, to consumers who were victims of cramming. Sprint and Verizon will each distribute refunds to harmed consumers through redress programs that will be conducted under the supervision of the Consumer Financial Protection Bureau. It is estimated that more than 2 million New Yorkers are entitled to refunds.
Sprint will also pay $12 million to the Attorneys General — including $340,301.30 to New York State — and $6 million to the Federal Communications Commission.
Verizon will also pay $16 million to the Attorneys General and $4 million to the Federal Communications Commission. The national mobile cramming settlements with the four mobile carriers have netted the State of New York a total of $1,882,846.27.
The settlements, like the settlements entered into by AT&T and T-Mobile in late 2014, require Sprint and Verizon to stay out of the commercial PSMS business — the platform to which law enforcement agencies attribute the lion’s share of the mobile cramming problem. Under each of the four settlements, the carriers, including Sprint and Verizon, must also take a number of steps designed to ensure that they only bill consumers for third-party charges that have been authorized, including the following:
The carriers must obtain consumers’ express consent before billing consumers for third-party charges, and must ensure that consumers are only charged for services if they have been informed of all material terms and conditions of their payment;
The carriers must give consumers an opportunity to obtain a full refund or credit when they are billed for unauthorized third-party charges;
The carriers must inform their customers when they sign up for services that their mobile phone can be used to pay for third-party charges, and must inform consumers of how those third-party charges can be blocked if the consumers do not want to use their phone to pay for third-party products; and
The carriers must present third-party charges in a dedicated section of consumers’ mobile phone bills, must clearly distinguish them from the carrier’s own charges, and must include in that same section information about the consumers’ ability to block third-party charges.