Sprint (NYSE: S) could be faced with a whopping $105 million fine from the FCC for knowingly overcharging its customers for third-party services, according to a National Journal report.
The report, which cited unnamed FCC officials, said that the enforcement action against Sprint has not yet been finalized. If approved, it would match the record $105 million fine AT&T Mobility (NYSE: T) agreed in October to settle an investigation by the FCC, which concluded the carrier billed customers millions of dollars in unauthorized third-party subscriptions and premium text messaging services. The settlement with AT&T is the largest enforcement action in the agency's history.
According to the complaint, Sprint billed customers for third-party services it knew subscribers had not asked for and did not want. The report said all five FCC commissioners are reviewing the proposed fine but have not yet voted to take action. Sprint and the FCC may still be engaged in settlement negotiations.
The FCC and Sprint declined to comment, the report said. The Consumer Financial Protection Bureau is also considering taking action against Sprint, though the CFPB declined to comment, the report added.
The FCC and other government agencies and lawmakers have been cracking down on carrier billing for unwanted third-party services, sometimes known as "cramming." In November 2013, AT&T, Sprint and T-Mobile US (NYSE:TMUS) entered into an agreement with 45 states to stop billing customers for premium SMS messages they receive. Verizon Wireless (NYSE: VZ) was not part of the settlement but said that it would also discontinue the practice.
In October AT&T agreed to distribute $80 million to current and former customers who were billed for third-party services they did not authorize. Additionally, the carrier agreed to pay $20 million to state governments participating in the settlement and make a $5 million penalty payment to the U.S. Treasury.
The FCC's Enforcement Bureau launched its investigation after receiving consumer complaints alleging that AT&T customers had been billed for unauthorized charges for third-party services that they did not want. According to the FCC, in some cases the complaints alleged that AT&T refused to issue refunds or would only refund one or two months' worth of such charges. Until January 2014, AT&T included charges for third-party services--such as monthly subscriptions for ringtones, wallpaper and text messages providing horoscopes and other information--on its customers' bills. The charge for each of these types of subscriptions was typically $9.99 per month, the FCC said.
Additionally, in July the Federal Trade Commission alleged in a lawsuit that T-Mobile made "hundreds of millions of dollars" by knowingly charging customers for purported "premium" SMS subscriptions that, in many cases, were "bogus charges" customers never authorized. T-Mobile initially said the complaint was "unfounded and without merit" but in October indicated it was looking to settle the case.
Meanwhile, as the National Journal notes, earlier this year the Senate Commerce Committee issued a report finding that third-party charges on phone bills have become a billion-dollar industry, with many of the charges being fraudulent and hidden under mislabeled names. Wireless carriers have all been keeping a portion of the revenue for themselves, according to the Senate report.
- see thus National Journal article
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