One of the big four US wireless carriers has received approval from a judge to settle a case over a practice known as "cramming."
US District Court judge William Pauley on Tuesday approved a settlement deal that will see Sprint pay $50 million to the Consumer Financial Protection Bureau (CFPB). The settlement is part of a broader deal Sprint struck with the CFPB and federal and state authorities over claims that it engaged in cramming -- a practice of bundling unauthorized charges, like payments for digital goods, into customer bills.
The settlement deal now paves the way for Sprint to pay its fines. The CFPB plans to use the cash to pay back affected consumers who fell victim to the cramming schemes over a period of nearly 10 years.
How you were 'crammed'
The CFPB has said that most consumers were targeted online through ads. After consumers clicked on those ads, they were brought to websites asking for their cellphone numbers. After getting phone numbers, the sites would claim to offer "free" content, but in fact would pass a charge on to carriers, which would then add those to customer bills. In yet more troubling cases, the website owners would deliver nothing to the consumers, but still pass on a charge. At no point were consumers told a charge would be placed on their bills, according to the agency.
The CFPB has said that carriers received as much as 40 percent of the revenue from those charges between 2004 and 2013.
"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," CFPB Director Richard Cordray said in a statement in December.
The CFPB is an independent US government agency that was created in 2010 by the Dodd-Frank Wall Street Reform and Consumer Protection Act to protect consumers in the financial sector. After it had discovered at least seven complaints brought against mobile carriers on cramming since 2013, the organization last year filed complaints against Verizon, Sprint, T-Mobile and AT&T to seek damages that would ultimately be paid back to consumers.
Carriers come to an agreement
The CFPB was able to quickly get all four carriers to settle their cases. Verizon has agreed to a total of $90 million in fines, matching the deal T-Mobile signed in December. AT&T agreed in October to a $105 million settlement. In total, Sprint's fines amount to $68 million, including $50 million to be paid to the CFPB and the remaining $18 million to go to federal and state fines.
Sprint has been one of the more vocal critics of the fines, saying in December that it was "disappointed" that it was targeted by the CFPB. The carrier added that it "strongly disagrees with [CFPB's] characterization of our business practices" and that it has safeguards in place to protect consumers from unauthorized billing.
Given its issues with the charges, Sprint's decision was rather unexpected when it announced its deal in May. Soon after, another unexpected wrinkle cropped up as Judge Pauley demanded additional evidence in the case between the CFPB and Sprint, saying that not enough detail was provided in the initial paperwork for him to sign off on the deal. In his order on Tuesday, Judge Pauley only approved the settlement and did not say whether either organization provided requisite information to finalize the accord.
Neither Sprint nor CFPB immediately responded to a request for comment.