Verizon and Sprint are paying a combined $158 million to settle investigations into unauthorized charges placed on their customers' phone bills. The practice is known as "cramming," and with today's announcement, the Federal Communications Commission has now made cramming settlements with all four major wireless carriers — AT&T settled in October for $105 million, and T-Mobile settled in December for $90 million. Of today's $158 million, $90 million will come from Verizon and $68 million will come from Sprint.
All four major carriers have now settled over cramming
The majority of the money will go toward setting up refund programs to give money back to consumers who were hit with unauthorized charges. These charges came from premium text messaging services, which might send information like horoscopes or celebrity gossip, and usually ran about $9.99 per month. Verizon would keep 30 percent of their fees, and Sprint would keep 35 percent. The trouble is, consumers quite often didn't sign up for them, and carriers wouldn't always offer refunds. The FCC says that when it asked carriers for evidence that their customers signed up for premium texting services, they "were unable to prove that these services were ever requested."
Verizon and Sprint are now no longer allowed to charge consumers for premium text messages. They will also now have to implement systems to ensure they obtain a customer's informed consent before allowing third-party charges. Both Verizon and Sprint, however, already began ending these charges a couple years back.
"Today’s settlement reflects Verizon’s continued focus on putting customers first," Verizon writes in a statement emailed to The Verge. Verizon says that it "rigorously protected" customers from these authorized charges, which, if true, seems like a significant failure. Verizon also says that it had a "broad policy" of allowing refunds on premium text message charges.
Maybe the problem is a warped understanding of what it means to put your customer first?
"Sprint was an industry leader in enacting rigorous safeguards to protect customers against unauthorized billing by [premium SMS] merchants," Sprint writes in a statement emailed to The Verge. Sprint also says that it "always put its customers’ interests first," and that it returned "tens of millions of dollars" in refunds long before this investigation began.
At least $70 million of Verizon's settlement and at least $50 million of Sprint's settlement will go toward customer refund programs. They will also pay fines to the US Treasury, of $4 million and $6 million, respectively. The remainder will go to state governments.
"Consumers rightfully expect their monthly phone bills will reflect only those services that they’ve purchased," Travis LeBlanc, the FCC Enforcement Bureau chief, says in a statement. "Today’s settlements put in place strong protections that will prevent consumers from being victimized by these kinds of practices in the future."
The FCC sounds fairly happy with the announcement of these actions. Cramming has been a big complaint from consumers, and the commission now appears to have accomplished the job of weeding it out from the biggest carriers in the US. Though Verizon and Sprint may have already ended the programs that enabled cramming, these settlements should ensure that their customers will actually end up getting their money back.