Hesse

Consumer protection agency sues Sprint for illegal charges

Sprint sued for "cramming" unwanted charges onto its consumers' bills.

Sprint sued for “cramming” unwanted charges onto its consumers’ bills. (Photo: Andrew Kelly/Reuters)

Sprint may have been overcharging its consumers to the tune of millions of dollars by cramming unauthorized charges onto its consumers’ bills. Haven’t we heard this before? Yes, in fact earlier this year, SKW attorney Brad J. Moore, also the President Elect of Public Justice (the country’s largest public interest law firm focused on consumer protection) obtained a $20 million class action settlement against Sprint PCS for illegal taxes.

Most recently, the Federal Communications Commission (FCC) and Consumer Financial Protection Bureau are targeting Sprint in an investigation for practices of illegally billing customers tens of millions of dollars for unauthorized charges related to premium text messages.

Just yesterday, the consumer bureau sued Sprint in Federal District Court in Manhattan. The lawsuit claims that Sprint has been operating a billing system that allows third parties to “cram” unauthorized charges onto consumers’ mobile phone bills.

On a parallel track, the F.C.C. is conducting a similar investigation. Sources reveal that a settlement where Sprint would pay $105 million in refunds/restitution is imminent.

“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 Richard Cordray, director of the consumer bureau. “As the use of mobile payments grows, we will continue to hold wireless carriers accountable for illegal third-party billing.”

In the past, the F.C.C., the Federal Trade Commission and state attorneys general have participated in lawsuits or settlements with AT&T and T-Mobile for similar alleged cramming charges. The practices under scrutiny typically focused on charges on customers’ bills for premium text messages, that came via horoscopes or other digital content.

The three major mobile companies have gotten hit with accusations of ignoring warning signs that many of the charges were unauthorized. Ignoring thousands of consumer complaints, these carriers blithely allowed third-party companies to assess the charges.

The action by the consumer bureau is a clear signal (again, no pun intended!) of its ongoing plans to police mobile payment systems (e.g., Apple Pay, Google Wallet, and others). Thank goodness for consumer protection groups and watchful agencies who are not entirely in the pockets of these mobile companies.

Class Action Against Sprint PCS Results in $20 Million Settlement

After eight years, a consumer class action lawsuit with Sprint customers, Christopher Hesse and Nathaniel Olsen as named plaintiffs, resulted in a $20 million settlement late last month.  The class action was on behalf of hundreds of thousands of mobile phone service customers of Sprint PCS. The lawsuit against Sprint PCS alleged that the mobile phone company had engaged in misleading and illegal billing practices by charging all of its customers in Washington State. Instead of acknowledging its illegal conduct and repaying the collected taxes to its customers, Sprint PCS embarked on an eight-year legal battle that reached as high as the the Supreme Court of the United States.

Sprint’s initial argument was that it did not need to abide by state law and continue to charge the illegal tax. It also argued that the case against it had already settled in a Kansas State court, despite the fact that Kansas residents cannot settle a consumer case that alleges Washington law in a Kansas court. After years on appeal, Sprint finally argued that the courthouse doors were closed to its Washington customers and that the case should be decided on an individual basis through a secret tribunal (made up of individuals who Sprint would select).

The settlement will fully reimburse every Sprint PCS cusomter who paid the illegal tax plus interest from 2002 to the present. Brad J. Moore of Stritmatter Kessler Whelan is one of the attorneys for the plaintiffs.

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