Settlement Announced with Sprint and Verizon for 'Mobile Cramming'
The settlements with Sprint Corporation and Verizon Wireless include $158 million in payments. They were the result of a joint effort by the Office of Attorney General's Bureau of Consumer Protection, Attorneys General for the other 49 states and the District of Columbia, the Consumer Financial Protection Bureau and the Federal Communications Commission.
“Cramming is a deceptive practice that exploits consumers,” Attorney General Kane said. “It is particularly insidious because consumers are charged for services they never ordered."
According to the Federal Trade Commission, cramming occurs when a company uses your mobile or landline phone bill like a credit card, and adds a charge for services, such as trivia, ringtones, daily horoscopes or love tips, to your bill that you didn’t agree to or use. Typical charges are around $9.99 per month.
The settlements require Sprint to pay $68 million and Verizon to pay $90 million. Of this amount, Sprint and Verizon are required to pay $50 million and $70 million, respectively, to consumers who were victims of cramming. Sprint and Verizon will each distribute refunds to affected consumers through redress programs that will be under the supervision of the Consumer Financial Protection Bureau.
Sprint will also pay $12 million to the Attorneys General and $6 million to the Federal Communications Commission. Meanwhile, Verizon will pay $16 million to the Attorneys General and $4 million to the Federal Communications Commission.
The Office of Attorney General's Bureau of Consumer Protection estimates the settlement with Sprint could potentially benefit approximately 440,000 Pennsylvania consumers and the settlement with Verizon could potentially benefit approximately one million consumers in the Commonwealth.
Sprint and Verizon are the third and fourth mobile telephone providers to enter into a nationwide settlement to resolve allegations concerning cramming. Attorney General Kane announced similar settlements with AT&T in October ($105 million), and T-Mobile in December ($90 million). All four mobile carriers announced they would cease billing customers for "premium" commercial text message subscription services in the fall of 2013.
Consumers who have questions about the redress programs can visit the program websites for Sprint ( www.SprintRefundPSMS.com ) and Verizon ( www.verizonthirdpartybillingsettlement.com ) or call the settlement administrators at: 877-389-8787 (Sprint), or 888-726-7063 (Verizon).
The settlement requires Sprint and Verizon to stay out of the commercial premium commercial text message subscription services business, the platform to which law enforcement agencies attribute the lion's share of the mobile cramming problem. Additional terms include:
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 the consumers 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.
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.