This week, federal regulators announced a series of high profile settlements concerning alleged cramming activities from some of the nation’s largest wireless carriers. The Federal Communications Commission announced that Verizon Wireless has agreed to pay $90 million and Sprint Corp. (“Sprint”) has agreed to pay $68 million in settlement of investigations initiated by the FCC involving the provision of allegedly unauthorized third-party premium text messaging services and related billing practices.
What else did the FCC obtain from Verizon and Sprint in the settlement?
In addition to the financial penalties, the companies also agreed to beef up its consumer protection protocols as part of the settlement, including agreeing to:
- Obtain informed consent from customers prior to allowing third-party charges;
- Clearly identify third-party charges on bills;
- Offer a free service to block third-party charges on bills;
- Cease offering third-party premium short message servicing billing.
In addition to its settlement with the FCC, Sprint has separately agreed to pay as much as $50 million in consumer relief as part of a settlement of a lawsuit brought by the Consumer Financial Protection Bureau (“CFPB”). We have previously written about this suit, in which the CFPB alleged that Sprint permitted third-party service providers to place unauthorized charges on Sprints’ subscriber phone bills for services such as ringtones, text-message horoscopes, and wallpapers.
Sprint neither admitted, nor denied, the CFPB’s allegations as part of the settlement, except as otherwise specifically stated in the proposed final judgment, filed this week in the Southern District Court of New York. The substantive allegations of the lawsuit included the following:
- During a period spanning from 2004-2013, Sprint allowed third parties to charge Sprint customers for unauthorized services;
- Sprint ignored customer complaints and other warning signs in continuing the alleged illegal billing activity;
- Sprint continued to outsource payment processing even after settling a cramming lawsuit with the Florida Attorney General;
- Sprint retained approximately 40 percent of the gross revenue generated from the alleged cramming activities.
Protect Yourself against a Cramming Lawsuit
News of these settlements should come as no surprise, as we have consistently alerted readers to the aggressive enforcement actions taken by state and federal regulators with respect to mobile cramming. Whether targeting service providers or content providers, the FCC, the Federal Trade Commission (“FTC”) and now the nascent, though equally keen, CFPB have proven especially vigilant in enforcing anti-cramming statutes and regulations. Verizon and Sprint are just the latest high profile companies to settle significant cramming lawsuits/investigations, as both AT&T and T-Mobile have recently settled cramming actions with the FTC. Accordingly, it is imperative that third-party content providers, as well as service providers, engage experienced counsel to ensure that their billing and marketing practices comply with all applicable state and federal laws, rules and regulations.