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The Meaning of the CFPB's Actions Against Sprint and Verizon Wireless

  • Written by Debra J. Ciskey

ciskey debra jIn May, 2015, the Consumer Financial Protection Bureau (CFPB) announced enforcement actions against two of the largest wireless telecommunications providers: Verizon Wireless and Sprint. These enforcement actions related to their billing practices as billers for third party companies that charged consumers for services on Verizon’s and Sprint’s billing platforms. The CFPB alleges many of the third party charges were unauthorized charges for services consumers did not order and did not want. While the charges might have been nominal for individual consumers, from 99 cents to $9.99 per month, the fact Verizon and Sprint received a 30 – 40% cut of the amounts paid by customers implicated them.

Specifically, the complaints against Sprint and Verizon identified four issues related to their billing practices:

• They enrolled customers in third-party billing without their authorization.
• They gave third parties access to customers and its billing system without implementing compliance controls.
• They failed to adequately resolve customer disputes.
• They ignored warnings from customers, government agencies, and public-interest groups.

One important finding in the consent agreements sends a strong signal to anyone under the jurisdiction of the CFPB. Both companies failed to track customer complaints about the unauthorized charges. This failure prevented them from recognizing there was a problem. The reality is consumer complaints can reveal systemic problems in need of correction. Disregarding complaints can have disastrous results, as these actions against Verizon and Sprint reveal.

The CFPB held Sprint and Verizon accountable for the actions of others in these actions, because they were complicit with those others — the crammers — for causing harm to consumers. Both companies profited from the unauthorized billing as they retained up to 40% of the amounts charged. As debt collectors, we can learn from these actions. We may be held responsible for the actions of our vendors and maybe even our clients, when we recognize there may be problems and we fail to take action.

For example, many of us use letter vendors. We are ultimately responsible for their poor performance. If we receive complaints from consumers stating they didn’t receive an initial notice, for example, we should be looking at our letter ordering process, our letter audit process, and the practices of our letter vendors. We have all heard horror stories of vendors who pocket postage advances and then never print or send letters. The responsibility for ensuring vendors perform as contracted is ours. What about your payment processing vendors? Are they adding fees about which you are unaware? How would you know? One way is to pay attention to your complaints.

Further, do complaints you receive indicate your clients have practices that can result in liability for you? Are you able to obtain validation? Can they itemize the balances they list with you for collection? Do they list accounts that consumers complain have been previously paid to another collection agency or directly to the client? While the jaded among us may dismiss such complaints as stalls — after all, we’ve heard it all before — not investigating such complaints can result in trouble. If you are furnishing accounts to credit reporting agencies, you have an even higher level of responsibility to investigate such allegations, because you are responsible for the accuracy and integrity of the information you furnish.

Because they had given third parties open access to their billing systems, Sprint and Verizon now must proactively seek confirmation from a consumer verifying any third party billing is authorized by the consumer before adding the charge to a customer’s cell phone bill. Disputed charges cannot be assigned out for collection or reported to credit reporting agencies, and cannot result in the addition of late fees or suspension of service for non-payment. They have also had to create redress funds to the tune of $50 million for Sprint and $35 million to $70 million for Verizon Wireless. Any remaining funds from the Verizon redress fund will be paid to the CFPB as disgorgement.

What’s the lesson here? These actions were brought under section 1036(a)(1) (B) of the Consumer Financial Protection Act — the section prohibiting unfair, deceptive or abusive acts or practices. These enforcement actions demonstrate the length, breadth, and width of the CFPB’s consumer protection scope. If these telecommunications providers not falling within the financial services sector can feel the authority of the CFPB, then we have to spread the word to all of our clients in all sectors to examine their billing practices and their complaint handling processes. Doing so can only help them, and help us too.

Debra Ciskey is the Compliance Officer at Wakefield & Associates. Inc. She is a member of the board of directors and a certified instructor for ACA International.