The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against Sprint accusing the third biggest mobile carrier of placing third-party charges in wireless bills without customers' consent. This marks the third case of its kind to be filed against a carrier for the practice called cramming.
The CFPB, an independent agency created in 2010 to oversea consumer financial products including mobile payment systems, says Sprint crammed its customers with unauthorized third-party charges from 2004 to 2013 for services that customers did not ask for, such as "premium" SMS services that delivered horoscopes and dating tips. CFPB says the charges range from anywhere between $0.99 to monthly subscriptions of $9.99, with Sprint receiving a 30 to 40 percent cut from the charges.
"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," says CFPB director Richard Cordray. "As the use of mobile payments grows, we will continue to hold wireless carriers accountable for illegal third-party billing."
The lawsuit alleges that Sprint refused to acknowledge red flags that indicated that their partners were known for unauthorized charging, as many of those merchants already faced lawsuits for cramming practices. The CFPB also says Sprint ignored consumer complaints about the crammed charges. In some instances, Sprint refused to refund customers and only instructed them how to block third-party services in the future. In others, Sprint simply referred them to the merchants.
Sprint, however, denies the allegations and says it has worked hard to ensure that no third parties are allowed to make unauthorized charges on its customers.
"We strongly disagree with its (CFPB) characterization of our business practices," says Sprint spokesperson Stephanie Vinge Walsh in a statement. "Sprint took considerable steps to protect wireless customers from unauthorized third-party billing and is an industry leader in proactively preventing unauthorized charges."
Sprint, through Walsh, also accuses the CFPB of using Sprint as a test case to see whether it has legal jurisdiction in the wireless industry. Two commissions, the Federal Communications Commission (FCC) and the Federal Trade Commission (FTC) are traditionally known as the government bodies overseeing wireless carriers. The FCC is also conducting an investigation of its own of Sprint's alleged cramming practices and could fine the company up to $105 million in penalties and refunds to customers affected by the practices.
"Protecting consumers from unauthorized fees on their phone bills is a team effort," says the FCC in response to Sprint's statement. "The commission has a great working relationship with CFPB and state law enforcement partners. Together, we are pursuing joint enforcement actions to protect consumers from unauthorized fees on their wireless bills."
Earlier this year, the FTC reached a settlement with AT&T amounting to $105 million that will be refunded to more than 20 million customers who were made to pay for services they did not buy. In July, T-Mobile also became the defendant in a similar case filed by the FTC, but the case has yet to reach a resolution.
