It it still happening, catching consumers by surprise. Those third-party charges added to wireless bills that were not authorized.
Consumers got another wake-up call Wednesday with the U.S. Consumer Financial Protection Bureau announcing it has filed suit against Sprint for allowing third parties to “cram” unauthorized charges on customers’ mobile-phone accounts.
There were “tens of millions of dollars” in unauthorized charges, the CFPB says.
Moreover, Sprint ignored complaints about the charges, the agency said. The CFPB seeks refunds for affected consumers and penalties to deter unauthorized third-party charges in the future.
“Today we are suing Sprint for allowing illegal charges to be crammed onto consumers’ wireless bills,” said CFPB Director Richard Cordray. “Consumers ended up paying tens of millions of dollars in unauthorized charges, even though many of them had no idea that third parties could even place charges on their bills. As the use of mobile payments grows, we will continue to hold wireless carriers accountable for illegal third-party billing.”
In the age of ubiquitous smartphones, consumers are using their mobile devices to purchase a variety of products, such as apps, games, books, movies, and music.
“Sprint ignored or mishandled complaints about the unauthorized charges,” Cordray said. “Sprint did not track customer complaints about the charges and thus lacked even the most basic fraud-alert mechanism.”
Wireless carriers collect and process payments for these purchases and control the networks connecting merchants and customers.
From about 2004 through 2013, nearly all wireless third-party billing involved products called “premium text messages” or “premium short messaging services” (PSMS) because they were frequently delivered by text messages.
The CFPB alleges that Sprint outsourced payment processing for these digital purchases to vendors called “billing aggregators” without properly monitoring them.
The CFPB said: “The lack of oversight gave aggregators near unfettered access to consumers’ wireless accounts. Sprint’s system attracted and enabled unscrupulous merchants who, in some cases, only needed consumers’ phone numbers to cram illegitimate charges onto wireless bills. The charges ranged from one-time fees of about $0.99 – $4.99 to monthly subscriptions that cost about $9.99 a month. Sprint received a 30-40 percent cut of the gross revenue from these charges.”
The Bureau is alleging that Sprint, as a payment processor for third parties, violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition on unfair practices.
Sprint also failed to track customer complaints about unauthorized charges, and as a result, lacked the most basic alert mechanism that could have revealed flaws in its monitoring systems, the CFPB alleges.