Sprint and Verizon to Pay $158 Million to Settle Allegations of 'Mobile Cramming'
Massachusetts to Receive $455,000 in Federal-State Settlements for Alleged Unauthorized Cellphone Charges; Mobile Cramming Settlements Now Total $353 Million
BOSTON – Sprint and Verizon have agreed to pay $158 million in state and federal settlements to resolve allegations that the companies placed charges for third-party services on cellphone bills that had not been authorized by the consumer, a practice known as “mobile cramming,” Attorney General Maura Healey announced today.
AG Healey, along with 49 states and the District of Columbia, the Consumer Financial Protection Bureau, and the Federal Communications Commission (FCC) reached settlements with Cellco Partnership, doing business as Verizon Wireless, and Sprint Corporation. The settlements include $158 million in payments to resolve claims that consumers were “crammed” with unauthorized charges, typically $9.99 per month, for “premium” short messaging services (PSMS), or text message subscription services such as horoscopes, trivia, and sports scores.
“Massachusetts customers were hit with mobile cramming charges for services that they had never heard of or requested,” AG Healey said. “Our office has worked with other states to hold major carriers accountable for these deceptive practices, to ensure that the cellphone industry has the right protections in place, and assist customers in getting their money back.”
Sprint and Verizon are the third and fourth carriers to enter into a nationwide settlement to resolve allegations regarding cramming. In December 2014, T-Mobile agreed to pay $90 million over cramming allegations, and in October 2014, AT&T agreed to pay $105 million. All four carriers announced in the fall of 2013 that they would cease billing customers for commercial PSMS.
Under the terms of the settlements, Sprint will pay $68 million and Verizon will pay $90 million. Of these amounts, Sprint is required to provide $50 million and Verizon is required to provide $70 million to repay consumers who were victims of cramming. Each company will distribute refunds to harmed consumers through programs that will be monitored by the Federal Consumer Financial Protection Bureau.
Sprint will also pay $12 million to the attorneys general and $6 million to the FCC. Verizon will pay $16 million to the state attorneys general and $4 million to the FCC. As a result of these settlements, Massachusetts will receive a total of about $455,000 from both carriers; approximately $195,000 from Sprint and approximately $260,000 from Verizon.
The settlements also require Sprint and Verizon to stay out of the commercial PSMS business – the platform to which law enforcement agencies attribute the lion’s share of the mobile cramming problem – until they establish procedures to ensure that consumers are only charged for services they have actually requested and agreed to pay for. Under each of the four settlements, the carriers, including Sprint and Verizon, must take a number of steps designed to ensure that they only bill consumers for third-party charges that have been authorized, including the following:
- Obtain consumers’ express consent before billing consumers for third-party charges, and ensure that consumers are only charged for services if the consumers have been informed of all material terms and conditions of their payment;
- Give consumers an opportunity to obtain a full refund or credit when they are billed for unauthorized third-party charges;
- Inform customers when they sign up for services that their mobile phone can be used to pay for third-party charges, and 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; and
- Present third-party charges in a dedicated section of consumers’ mobile phone bills, clearly distinguish them from the carrier’s own charges, and include in that same section information about the consumers’ ability to block third-party charges.
Sprint and Verizon consumers can submit claims under the refund programs by visiting www.SprintRefundPSMS.com or www.CFPBSettlementVerizon.com. On those websites, consumers can also find information about refund eligibility and how to obtain a refund, and can request a free account summary that details PSMS purchases on their accounts. The claims period for affected T-Mobile customers is open until June 30, 2015. Consumers can file a claim on the FTC website at: www.ftc.gov/enforcement/cases-proceedings/refunds/t-mobile-refunds.
If consumers are unsure about whether they are eligible for a refund, or have questions about the program, they can visit the program websites or call the settlement administrators at: 877-389-8787 (Sprint) or 888-726-7063 (Verizon) for more information.
For additional assistance, consumers can call the Attorney General’s consumer hotline at (617)727-8400 or visit the AG’s website for guidance on how to file a claim.
This matter was handled by Assistant Attorney General Mychii Snape of AG Healey’s Consumer Protection Division.