Consumer Financial Protection Bureau Settles Claims of Illegal Billing Practices with Cellular Providers

CFPA  •  CFPB  •  Telecommunications

On May 12, the Consumer Financial Protection Bureau (“CFPB”) announced that it is seeking to settle claims against two cellular providers who have agreed to return $120 million in funds to wireless customers. The Bureau filed proposed orders in the United States District Courts for the District of New Jersey and Southern District of New York which, if approved, would settle enforcement actions alleging unfair acts and practices under the Consumer Financial Protection Act (“CFPA”) brought by the Bureau in coordination with the state attorneys general and Federal Communications Commission (“FCC”). The civil complaint filed against one of the providers alleged that it allowed merchants unfettered access to “cram[] . . . fabricated charges” onto customers’ bills for goods known in the industry as “premium text messages” or “premium short messaging services.” These digital products consist of “one-time purchases or monthly subscriptions to ringtones, wallpaper, and text messages providing flirting tips, horoscopes, and other digital content” for which the cellular provider retained 30% of the charge. The Bureau alleged that the cellular providers outsourced payment processing for these services to third-party vendors, but then failed to properly monitor them, resulting in millions of dollars of illicit charges to consumers. If approved by the courts, the parties’ proposed consent orders would require the cellular providers to provide $120 million in redress to affected customers, implement new billing practices with increased transparency, obtain informed consent from consumers before allowing third-party billing, improve dispute resolution procedures, and enhance customer service training programs. The cellular providers would also be required to pay $38 million in federal and state fines.

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