January 5, 2015
Before the new year rolled in, the U.S. government got a few more hits on U.S. carriers for deceptive billing practices in 2014.
Late last December, Sprint and T-Mobile both came under fire: Sprint was slammed with lawsuits from the U.S. Consumer Financial Protection Bureau (CFPB) and the FCC – the latter of which could amount to a mobile cramming fine for $105 million.*
A few days later, T-Mobile settled with the FCC to pay $90 million in similar penalties for cramming.†
These developments are the latest battles in the U.S. government’s larger war on deceptive carrier charges (see Defining Unlimited: US Government Cracks Down on Deceptive Carrier Practices).
In a related lawsuit, AT&T agreed to pay a $105 million penalty – the largest enforcement action ever of its kind – in response to a cramming investigation late last year.
And in the only nationwide carrier lawsuit that didn’t involve cramming, no. 1 U.S. carrier Verizon agreed to settle a $64.2 million class-action lawsuit alleging that the carrier over-charged customers on its Family Share Plan.
From our previous post, about the definition and effects of mobile cramming – cramming is the practice of billing customers for unauthorized third-party services.
Major wireless carriers (AT&T, Sprint, T-Mobile and Verizon) agreed to stop billing customers for third-party services (e.g. ringtones or text-message horoscopes) as early as last year.
Then, in early 2014, a U.S. Senate committee officially ruled that mobile cramming is a pervasive activity, prompting an initiative from the FTC to crack down on cramming cases.
In all the current cramming cases, consumers were typically charged $9.99 from third parties, usually without their consent. Because the wireless carriers allegedly earned a cut of the proceeds, the FCC claims that they “looked the other way” despite knowing these charges were not legitimate.†
For more information about cramming, see Mobile Cramming: What Is It and Who Is Affected?
In the third cramming-related government enforcement action of 2014, the CFPB filed a lawsuit against Sprint on December 17th over cramming allegations.*
According to the CFPB, Sprint allowed third parties to charge consumers tens of millions of dollars for unwanted services (e.g. ringtones or text-message horoscopes) while keeping 40 percent of the gross revenue from 2004 through 2013.
The case is Consumer Financial Protection Bureau v. Sprint Corp, U.S. District Court, Southern District of New York, No. 14-cv-9931.
According to the details of the lawsuit, T-Mobile will pay at least $67.5 million to fund a program for consumer refunds, plus another $18 million to state governments and $4.5 million to the U.S. Treasury.
The FCC’s press release says current and former T-Mobile customers can apply for refunds at http://www.tmobilerefund.com. Once the website is officially up and running, consumers will be able to fill out a claim.
* Selyukh, Alina. U.S. consumer bureau sues Sprint for phone bill ‘cramming’, Reuters.com. Thomson Reuters.
† Roberts, Jeff John. T-Mobile will pay $90M over bogus charges on customer bills, GigaOm. GigaOm, Inc.