CFPB accuses Sprint of illegal billing in lawsuit

The Consumer Financial Protection Bureau (CFPB) is suing Sprint for allegedly cramming customers' phone bills with illegal charges.

The bureau on Wednesday said the wireless company violated prohibitions on unfair practices contained in the Wall Street reform law. It is urging the courts to force the company to refund tens of millions of dollars to customers and impose fines.

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“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," CFPB Director Richard Cordray said in a statement.

The bureau said the exact number of customers affected and the exact dollar amounts would be uncovered as it proceeds with the lawsuit, which was filed in a federal court in New York.  

The lawsuit covers Sprint’s actions from 2004 to 2013, when the company outsourced its third-party billing for text message alerts. The consumer bureau alleged that the outside vendors had "unfettered access" to customers' accounts with inadequate oversight.

The system, from which Sprint profited, allowed third parties to easily tack on illegitimate charges to customers' bills, according to the lawsuit. Most of the customers affected were targeted online to give up their phone numbers.

The bureau alleged that Sprint disregarded a series of red flags about the vendors it worked with and sometimes ignored customer complaints about the fraudulent charges. Most customers were unaware that Sprint could allow the billing, making it hard for them to spot unapproved charges. 

Cordray said Sprint should have been on notice about the issue because it has run up against past law enforcement action over cramming. 

"In the end, Sprint customers should not have been subjected to unauthorized charges and Sprint needs to be held accountable," Cordray said. 

Sprint disputed the allegations, calling itself an "industry leader" on protecting against unauthorized charges. It said said it took "considerable steps" to protect against that type of billing and has consistently helped customers resolve the charges.

"We are disappointed that the CFPB has decided to target Sprint on this issue, and we strongly disagree with its characterization of our business practices," Sprint said in a statement. 

The bureau worked closely with the Federal Communications Commission, which is reportedly preparing $105 million in fines against Sprint.

Jeff Ehrlich, the bureau's deputy enforcement director, would not describe how the lawsuit Wednesday affects the FCC's work. He did not say whether the bureau attempted to negotiate a settlement ahead of the lawsuit. 

He said the two agencies are in close coordination. 

"I'm not going to comment on another agency's reported enforcement action," he told reporters. "What I will say is that we have different statutory authority than the Federal Communications Commission. Our authority permits us to seek refunds for consumers who have been harmed under the Dodd-Frank Act, and to obtain injunctive relief to stop unlawful conduct."

The FCC action is still pending. An FCC representative said the issue requires a team effort. 

"The commission has a great working relationship with CFPB and state law enforcement partners," the representative said. "Together, we are pursuing joint enforcement actions to protect consumers from unauthorized fees on their wireless bills."

— Updated at 2 p.m.