This year, Sprint Corporation, one of the nation’s largest wireless services provider, was on the naughty list—at least according to the CFPB.
The CFPB delivered an early Christmas present to Sprint in the form of a lawsuit. According to the CFPB, Sprint has a checkered history of “cramming” customers’ bills with unauthorized third-party charges, and its billing system made detection of these charges exceedingly difficult.
Allegedly, until 2013, Sprint allowed customers to be enrolled in third-party billing systems without consent, and Sprint outsourced its billing to third-party vendors called billing aggregators. In some instances, customers would click on ads that brought them to websites where third-party merchants tricked customers into incurring charges for premium services. Other merchants fabricated charges on wireless bills without delivering any goods. The CFPB noted that Sprint turned a blind eye to these practices, while collecting 30 to 40 percent of the gross charges crammed for its troubles.
In his prepared remarks, Director Cordray noted, “Part of our mission here at the [CFPB] is to make sure that consumers are treated fairly in the financial marketplace. Sprint mistreated consumers egregiously by creating a billing system that invited illegal third-party charges and processed them in a highly irresponsible manner.”
The CFPB expressed its displeasure with Sprint’s practices in its lawsuit. Specifically, the lawsuit claims that Sprint took advantage of customers and treated them unfairly in at least four ways:
- allowing third parties to place illegitimate charges on customers’ bills;
- automatically enrolling customers in third-party billing systems without consent;
- disregarding red-flags showing that its billing system was a “breeding ground for unauthorized charges”; and
- ignoring or mishandling complaints about the unauthorized charges.
The CFPB also noted that Sprint—and other wireless carriers—now allow third-party charges through programs such as “mobile wallets.” This creates a heightened duty to protect customers. The CFPB explained, “Companies must have strong safeguards in place and they must take vigorous and proactive steps to protect consumers against fraud and abuse.”
We have three “Sprint lessons-learned” for our consumer finance companies: One, don’t ignore the red-flags of consumer complaints. Two, you are responsible for your vendors. And, three, don’t cheat.