A federal regulator is suing Sprint for illegally billing wireless customers for unauthorized third-party charges.
The Consumer Financial Protection Bureau (CFPB) filed a lawsuit Wednesday against the telecommunications company for operating a billing system that allowed third parties to place unauthorized charges on customers' cell phone bills, a practice known as cramming. According to the complaint, Sprint received a 30 to 40 percent cut from these charges, netting hundreds of millions of dollars before shutting down the program in 2013.
While third-party billing is commonly used by customers to make purchases with their cell phones, from 2004 to 2013 most instances of this type of billing was for text message services that offered horoscopes, news or trivia. The charges for these text messages ranged from one-time fees of about 99 cents to $5, to monthly subscriptions costing $10. Customers often unknowingly sign up for the services through deceptive websites. Vague and misleading billing statements from wireless carriers made the unauthorized charges difficult to spot.
According to the CFPB complaint, Sprint outsourced payment processing for digital purchases to outside vendors without properly monitoring them, allowing merchants to put charges on customer's bills without their knowledge or consent. Sprint also failed to let customers opt-in for these charges and automatically enrolled customers.
The complaint also alleges that Sprint ignored red flags about its system and failed to track customer complaints about the charges. The company failed to provide full and speedy refunds to customers, sometimes refusing them all together.
Sprint isn't the only wireless carrier seeing a backlash from the practice. In October, AT&T settled a similar complaint brought by the FTC. As part of the settlement the company was ordered to pay $105 million in refunds and fines.