(CN) – Verizon and Cellco will pay $158 million to settle federal charges of profiting from third-party cramming on wireless phone bills, the Consumer Financial Protection Bureau said Tuesday.
All 50 states and the District of Columbia joined in the giant lawsuit against Cellco Partnership dba Verizon Wireless.
New Jersey’s federal complaint, like the other states’, claims that Verizon gave third parties “virtually unfettered access to its customers’ accounts,” allowing them to cram unauthorized charges onto wireless bills.
Verizon made “hundreds of millions of dollars” from it, because it kept 30 percent or more of the gross revenue it collected from the crammers’ charges, the Financial Protection Bureau said in its New Jersey complaint.
“Verizon continued to operate its flawed system despite numerous red flags such as high refund rates and complaints from customers, law enforcement agencies and consumer groups.”
Of the $158 million, Verizon/Cellco must payback consumers $120 million, pay $28 million to state attorneys general, and $10 million to the FCC.
New Jersey’s 10-page complaint details a concise, shameful history of regulatory failure from states and the federal government.
Telephone companies “opened their billing platforms to third parties” in the 1990s, the CPFB’s enforcement attorney Genessa Stout wrote in the May 12 filing. Thus was cramming born.
“By the late 1990s, federal and state authorities realized that nearly all third-party landline charges were fraudulent. In 1998, however, the larger telephone companies convinced government authorities to allow the industry to self-regulate through a set of voluntary guidelines.”
With the foxes guarding the fast-growing henhouse, “Unauthorized billing not only persisted but grew after self-regulation.” The FCC estimated in 2011 that 15 million to 20 million households were being bilked each year by landline cramming. The Senate Commerce Committee reported that year that 300 million third-party charges appeared on landline bills each year, totaling more than $2 billion.
But Verizon handed over its wireless billing system to “aggregators[,] without adequate oversight,” the bureau says, and it enrolled customers in third-party billing without their consent.
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