U.S. Consumer Bureau Sues Sprint Over Cramming

Sprint Corp. Stores Ahead Of Earnings Figures
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By Alina Selyukh

WASHINGTON -- A U.S. consumer watchdog agency on Wednesday filed a lawsuit against wireless carrier Sprint (S) over unauthorized charges on customers' cellphone bill, a practice known as cramming.

In a third cramming-related government enforcement action this year, the Consumer Financial Protection Bureau alleges that from 2004 to December 2013, Sprint billed its customers tens of millions of dollars in unauthorized third-party charges while keeping up to 40 percent of the revenue.
The Federal Communications Commission is also weighing a $105 million fine against Sprint for charging its customers for services that they had never requested. The case against Sprint marks the first joint public action by the FCC and the CFPB.

In July, the Federal Trade Commission sued T-Mobile (TMUS) over similar billing issues, and the FCC and the FTC settled such a case with AT&T (T) in October.

'We Strongly Disagree,' Sprint Says

The bureau now argues that Sprint failed to properly monitor vendors to whom it had outsourced the processing of Sprint customers' payments for digital purchases, resulting in illegitimate charges for text message services that many consumers were unaware of. The agency is seeking refunds and penalties.

"We strongly disagree with [CFPB's] characterization of our business practices ... Sprint took considerable steps to protect wireless customers from unauthorized third-party billing," spokeswoman Stephanie Vinge Walsh said in a statement. "It appears the CFPB has decided to use this issue as the test case on whether it has legal authority to assert jurisdiction over wireless carriers," she said in an email.

The case is Consumer Financial Protection Bureau v. Sprint Corp, U.S. District Court, Southern District of New York, No. 14-cv-9931.
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