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Mobile

Verizon, Sprint to pay $158M to settle charges of 'cramming'

The agreement includes $120 million for refunds to customers who had unauthorized third-party fees added to their phone bills. The wireless carriers also will improve their billing practices.

Sprint and Verizon join the other big wireless carriers, AT&T and T-Mobile, in settling charges over "cramming." Josh Miller/CNET

Verizon and Sprint agreed to pay a combined $158 million -- including $120 million in refunds to consumers -- to settle charges they allowed their customers to be illegally billed by third parties, the Consumer Financial Protection Bureau said on Tuesday.

The wireless providers agreed to pay $38 million in federal and state penalties, as well as agreeing to improve oversight of third-party billing. The settlements, which are subject to final court approval, were announced in conjunction with the Federal Communications Commission and the state attorneys general.

"Sprint and Verizon had flawed billing systems that allowed merchants to add unauthorized charges to wireless customer bills," CFPB Director Richard Cordray said in a statement. "Today's actions will put $120 million back into the pockets of harmed consumers and require these companies to improve their billing practices going forward."

Most consumers were targeted online through ads that once clicked on, brought them to websites asking for their cellphone numbers. Some merchants tricked consumers into providing their numbers to get "free" digital content only to be charged for it, the bureau said. In other cases, merchants fabricated charges without delivering any goods or communication with consumers.

The companies received as much as a 40 percent cut of the gross revenue from these charges, which were incurred from about 2004 through 2013, the CFPB said.

"Well before any government action, Verizon Wireless stopped allowing companies to place charges for premium text message services on customers' bills," spokeswoman Debra Lewis said in a statement. "Customers who believe they were billed improperly for these services may seek a refund."

Sprint "returned tens of millions of dollars long before the government initiated its investigation of our industry," the company said in a statement.

New York Attorney General Eric Schneiderman announced similar settlements with AT&T in October ($105 million) and T-Mobile in December ($90 million).

Under the refund programs, to be overseen by the CFPB, Verizon customers can submit claims at www.CFPBSettlementVerizon.com or ask questions by calling (888) 726-7063. Sprint customers can submit claims at www.SprintRefundPSMS.com or call (877) 389-8787.

This story originally posted as "Verizon, Sprint to pay $158M over 'cramming' cases" on CBSNews.com.