Verizon, Sprint To Pay $158 Million For ‘Cramming’ On Phone Bills

Cell Phones, Utilities
Verizon Sprint Cramming

Verizon and Sprint allowed third-party companies to load customers’ wireless bills with unauthorized charges, all while receiving upward of 30% of the profits from them, the federal government alleges.

The two wireless giants will pay a total of $158 million for allowing “cramming” under the terms of an order filed in federal court by the Consumer Finance Protection Bureau.

“Consumers bore the brunt of those charges and ended up paying millions of dollars while the companies reaped profits,” CFPB Director Richard Cordray said in a written statement Tuesday. “Today’s actions will put $120 million back into the pockets of harmed consumers and require these companies to improve their billing practices going forward.”

Many products, from mobile apps and games to digital books and movies, can be purchased via wireless-bill payments. In “cramming,” unscrupulous vendors sometimes need nothing more than victims’ phone numbers to begin charging them for services or products that were promoted as being free or, sometimes, for no product or service at all.

The bureau says that a lack of oversight by Sprint and Verizon “allowed the vendors to have nearly unfettered access to consumers’ wireless accounts.” It also alleges that the companies, which received a percentage of each bogus payment, ignored complaints about them.

The CFPB first filed suit against Sprint in December, before filing Tuesday’s consent order. The lawsuit and order against Verizon both were filed Tuesday.

Under Tuesday’s terms, Verizon will pay $90 million, and $70 million of that sum will go to repay customers. Sprint will have to pay $68 million, with $50 million of that being returned to consumers. The companies will pay the remainder as fines to the government.

AT&T and T-Mobile both have already reached similar multimillion-dollar settlements with the government over cramming charges.

Illegal charges that were discovered ranged from one-time fees of 99 cents up to recurring monthly charges of $9.99, the bureau said.

Victims often were tricked online by advertisements that sent them to websites that asked for their phone numbers.

Doug Gross is a staff writer covering personal finance for NerdWallet. Follow him on Twitter @doug_gross and on Google+.


Image via iStock.