What did the companies do wrong?
Both companies were charged with billing customers millions of dollars in unauthorized third-party premium text messaging services (PSMS). The PSMS charges included services such as monthly subscriptions for ringtones, wallpapers, and text messages providing horoscopes, flirting tips, celebrity gossip, and other information. The typical charge for these types of subscriptions was $9.99 per month. Verizon retained 30% or more of each third-party charge that it billed, while Sprint received approximately 35% of collected revenues for each of its third-party charges.
What laws were they accused of violating?
The FCC investigation focused on charges that the companies engaged in an unjust and unreasonable practice under Section 201 of the Communications Act by billing consumers for products or services they had not authorized.
The CFPB alleged the companies, as a payment processor for third parties, violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition on unfair practices by: (1) allowing third-parties to illegally charge consumers; (2) automatically billing consumers for illegitimate charges without their consent; (3) disregarding red flags about third parties; and (4) ignoring consumer complaints about unauthorized charges.
What operational changes will the companies implement to ensure consumer consent for third party charges?
Under the settlements, Verizon and Sprint agreed to:
What operational changes will the companies make to their customer service organizations?
Under the settlements, Verizon and Sprint agreed to provide customers calling about third-party charges with access to a customer service representative who has access to at least 12 months of the consumers’ billing statements.
In addition, the companies will, for 6 years, conduct a training program to ensure customer service personnel resolve customer complaints about unauthorized third-party charges in accordance with the agreements.
Are the companies required to keep any records or file any reports?
Yes. Both companies agreed to implement a process to track third-party charge complaints and associated refunds and credits and to retain such records for 6 years. They also agreed to file quarterly reports with the FCC for 6 years. Under the CFPB and Attorney General settlements, the companies agreed to create and maintain for 5 years all documents and records necessary to demonstrate compliance with the provisions of the their respective orders.
How will the consumer refunds work?
Each company submitted a consumer redress plan to the CFPB for review. The CFPB agreed to the plans and will oversee each redress program.
Verizon will provide refunds to consumers of at least $35 million, not to exceed $70 million. Once Verizon pays at least $35 million in consumer refunds, it may claim a $16 million credit. If the full $70 million still has not been exhausted after the $16 million credit is applied, Verizon may claim an additional $5 million credit for costs associated with administering the redress plan. If, after March 31, 2016, the full $70 million (including the credits described above) has not been exhausted, Verizon will pay the remaining amount to the Bureau or the Bureau’s agent.
Sprint will provide up to $50 million for consumer redress. Sprint will provide notice of consumers’ right to file claims and receive redress under the supervision of the CFPB.
Verizon customers can submit claims for refunds at www.CFPBSettlementVerizon.com or can learn more information about the Verizon settlement by calling 888-726-7063. Sprint customers can submit claims for refunds at www.SprintRefundPSMS.com or can learn more information about the Sprint settlement by calling 877-389-8787.
Have other carriers entered into similar decrees?
Yes. Last year, AT&T Mobility agreed to a $105 million settlement and T-Mobile USA, Inc. agreed to a $90 million settlement. See the Regulatory Mix dated 12/22/14 and 10/9/14. All told, by working together, the FCC, CFPB, Federal Trade Commission, and states’ attorneys general have brought a total of $353 million in penalties and restitution against the U.S.’s four largest wireless carriers, structuring these settlements so that $267.5 million of the total will be returned to affected customers.
How can I get copies of the settlement documents?
The FCC and CFPB settlement documents are available via the following links:
Verizon CFPB Stipulated Final Judgment And Order
Sprint CFPB Stipulated Final Judgment and Order