The Consumer Financial Protection Bureau announced Wednesday that it was suing Sprint Corp. for billing customers for unwanted services.
The agency said the company’s negligence allowed vendors it subcontracted with to illegitimately “cram” charges onto consumers’ bills. Sprint has denied the allegations.
“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,” said CFPB Director Richard Cordray. The company is being charged with “unfair practices” under both the Dodd-Frank financial reform law and the Consumer Protection Act.
In a statement, Sprint said it was “disappointed” with the CFPB’s charges, arguing it was taken in by the scam artists as well.
“We strongly disagree with its characterization of our business practices. Sprint took considerable steps to protect wireless customers from unauthorized third-party billing and is an industry leader in proactively preventing unauthorized charges. We recognize this is an important issue for our customers, and we consistently have encouraged any customers who think they may have incurred an unauthorized third-party charge on their phone bill to contact Sprint to resolve the issue.”
The bureau’s complaint says that between 2004 and 2013 Sprint outsourced its payment processing for digital products bought online to third-party vendors but did not properly monitor them. Some vendors added illegitimate charges onto wireless bills, such as upping the cost of monthly subscription fees. Sprint stopped the practice in 2013 by changing its billing system.
The CFPB says that Sprint’s billing system made the practice too easy, partly by allowing customers to be automatically enrolled for new charges. “This policy helped perpetuate the wrongdoing because many customers did not spot unauthorized charges, as they were unaware that third parties could place charges on their bills,” the bureau said.
The agency does not claim that Sprint had direct knowledge of the actions, but said the company ignored red flags and customer complaints. It notes in its press release that Sprint received a 30-40 percent cut of the gross revenue from the vendor’s charges and “profited handsomely from its system.”
