The U.S. Federal Communications Commission (FCC) is reportedly weighing a fine of $105 million against Sprint for adding unauthorized third-party charges to its wireless customers' phone bills. The practice, known has "cramming," has come under increasing fire from the agency this year. Any decision on a fine must first be approved in a vote by the FCC's five commissioners.
According to the Wall Street Journal, "an FCC official confirmed that the agency is preparing to fine Sprint for billing customers for text message alerts, horoscopes, sports scores, ring tones and other unwanted services." The officials told the Journal, the FCC’s probe focused on a three-month window from August to October 2013, during which Sprint allegedly received almost 35,000 complaints from consumers about the unwanted charges.
Sprint today was also targeted by the Consumer Financial Protection Bureau (CFPB), which announced that it has filed a lawsuit against the mobile carrier in connection with a number of cramming allegations. The CFPB's lawsuit is seeking both refunds for affected customers and penalties to deter future cramming practices.
CFPB Lawsuit 'Disappointing'
We reached out to Sprint for comment on both the FCC and CFPB actions. Stephanie Vinge, Sprint's spokesperson for litigation, privacy and security issues, told us the company doesn't comment on "rumor and speculation" so had no statement regarding the reported FCC fines.
As to the CFPB's lawsuit, Vinge said, "We are disappointed that the CFPB has decided to target Sprint on this issue, and we strongly disagree with its characterization of our business practices. Sprint took considerable steps to protect wireless customers from unauthorized third-party billing and is an industry leader in proactively preventing unauthorized charges. We recognize this is an important issue for our customers, and we consistently have encouraged any customers who think they may have incurred an unauthorized third-party charge on their phone bill to contact Sprint to resolve the issue."
Vinge noted that Sprint was "the first major wireless carrier to partner with an outside compliance vendor to proactively monitor companies that placed charges on Sprint bills." The company also provides resources to customers who wish to block third-party charges and offers a "favorable refund policy" for consumers who believe they have incurred crammed charges, she added.
Numerous 'Red Flags' Missed
In October, the FCC reached a $105 million settlement with AT&T Mobility over similar cramming complaints about unauthorized third-party charges and premium text messaging services. At the time, the agency noted that it was "the largest enforcement action in FCC history."
In July, the U.S. Federal Trade Commission (FTC) also came out with new guidelines aimed at improving anti-cramming protections for wireless customers. The guidelines didn't expand existing regulations but recommended a set of consumer-focused best practices for mobile carriers.
According to the FTC, the real cost of cramming to consumers in dollars is unknown. Three cases brought by the agency in 2013 were settled with the FTC handing down more than $160 million in judgments. Cramming is "almost the perfect scam," one official with the National Consumers League has said.
"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," said CFPB Director Richard Cordray, upon announcing the agency's lawsuit against Sprint. "As the use of mobile payments grows, we will continue to hold wireless carriers accountable for illegal third-party billing."
Unauthorized charges to Sprint customers between 2004 and December 2013 amounted to "millions of dollar each year," according to the CFPB filing. The company's billing and payment system, "gave third parties virtually unfettered access to its customers' accounts," according to the CFPB lawsuit. The company also continued to operate that system "despite numerous red flags, such as high refund rates and complaints from customers, law-enforcement agencies, and consumer groups."
The CFPB's complaint noted a number of violations by Sprint under the Dodd-Frank Wall Street Reform and Consumer Protection Act.