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Wireless companies pay out millions to settle ‘cramming’ lawsuits

On Behalf of | May 21, 2015 | Business Litigation |

Thanks to the advent of web-based billing, most people no longer receive their monthly statements for things like cable television, credit cards and cellphones in the mailbox, but rather in their inbox.

While this web-based billing certainly has its advantages from being more environmentally friendly to ensuring timely payment when linked to an online bank account, it isn’t without certain disadvantages.

For instance, many people simply pay their monthly bill without actually opening the email containing their statement or logging onto the applicable website. This, of course, presents an elevated risk of them failing to notice unauthorized charges.

Indeed, the nation’s major wireless providers have all been hit with charges from the Consumer Financial Protection Bureau alleging that they have engaged in an illegal practice known as “cramming.”

For those unfamiliar with this term, consider that these wireless providers regularly add fees to customer bills in order to collect payment for services and other products (apps, games, media, etc.) purchased from third party vendors.

Where cramming comes into play is when these third party vendors add otherwise unsolicited charges onto customer bills — think unwanted premium text messages offering things like horoscopes and love tips — by channeling them into the systems of the wireless providers or misleading consumers.

The aforementioned lawsuits filed by the CFPB against the nation’s major wireless providers allege that they profited a considerable amount from these cramming practices. For instance, the agency’s lawsuit against Sprint alleges that it kept as much as 40 percent of the illegal revenue generated by cramming companies.

The good news to all this is that the practice of cramming seems to be coming to an end, as those wireless providers that engaged in this practice have reached multimillion dollar settlements with the CFPB.

Indeed, T-Mobile paid $90 million and AT&T paid $105 million in settlements last year, while Sprint and Verizon have reached tentative settlements of $68 million and $90 million, respectively.

It remains to be seen whether the resolution of these matters will usher in a sort of temporary moratorium on business litigation against wireless companies. Stay tuned for updates …