Sprint & T-Mobile Charged with “Cramming”

Posted by Sam Churchill on

Sprint is facing a lawsuit by the Consumer Financial Protection Bureau that alleges the carrier illegally billed wireless consumers for tens of millions of dollars in unauthorized third-party charges. The lawsuit contends that Sprint operated a billing system that allowed third parties to bill for unwanted services, a process known as “cramming.”

T-Mobile has agreed to pay the FTC and FCC $90 million to settle cramming charges, according to the FCC’s site. An FTC and FCC investigation found T-Mobile guilty of breaking the law by “engaging in an unjust and unreasonable practice of billing consumers for products or services they had not authorized; and failing to provide a brief, clear, non-misleading, plain language description of the third-party charges.”

“Today we are suing Sprint for allowing illegal charges to be crammed onto consumers’ wireless bills,” CFPB Director Richard Cordray said in a statement. “Consumers ended up paying tens of millions of dollars in unauthorized charges, even though many of them had no idea that third parties could even place charges on their bills. As the use of mobile payments grows, we will continue to hold wireless carriers accountable for illegal third-party billing.”

The CPFB contends Sprint outsourced payment processing for digital purchases such as apps, games, books, movies, and music to vendors called “billing aggregators” without properly monitoring them. The lack of oversight, the lawsuit alleges, gave aggregators “near unfettered access to consumers’ wireless accounts,” according to a CPFB statement.

“Sprint’s system attracted and enabled unscrupulous merchants who, in some cases, only needed consumers’ phone numbers to cram illegitimate charges onto wireless bills,” the CPFB said. “The charges ranged from one-time fees of about $0.99 to $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.”

“We strongly disagree with (the CFPB’s) characterization of our business practices,” Sprint spokeswoman Stephanie Vinge Walsh said in a statement.

“It appears the CFPB has decided to use this issue as the test case on whether it has legal authority to assert jurisdiction over wireless carriers,” she said in an email.

Prodded by state attorneys general, Verizon, AT&T, Sprint and T-Mobile last year agreed to stop billing customers for third-party services.

The F.C.C. is conducting a similar investigation, and people close to the investigation said the parties were close to completing a settlement under which Sprint would pay $105 million in refunds and restitution for the unauthorized transactions.

Posted by Sam Churchill on Thursday, December 18th, 2014 at 12:31 pm .

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