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Verizon Wireless to pay $25 million to settle with regulators over 'mystery fees'

The mobile provider improperly charged data access fees to about 15 million customers, the FCC found.

October 29, 2010|By Jim Puzzanghera, Los Angeles Times

Reporting from Washington — Verizon Wireless agreed to pay the government $25 million to settle complaints that it inappropriately charged customers more than $50 million in so-called mystery fees, often for inadvertently accessing the Internet without a data plan, federal regulators said Thursday.

As part of a consent decree, Verizon agreed to refund those charges to about 15 million customers — a move the company announced about a month ago. The carrier, which did not admit liability, also will take steps to avoid similar problems in the future.

The steps it must take include providing plain-language explanations of potential data fees and offering customers the option of blocking Internet access and other downloads. For customers without data plans, Verizon charges $1.99 per megabyte.

The $25-million settlement, to be paid to the U.S. Treasury, is a record amount obtained by the Federal Communications Commission. It tops a $24-million settlement paid by Univision Communications Inc. in 2007 for improperly using children's soap operas to comply with federal requirements for educational programming.

FCC Chairman Julius Genachowski said the Verizon settlement "sends a clear message to American consumers: The FCC has got your back."

"People shouldn't find mystery fees when they open their phone bills — and they certainly shouldn't have to pay for services they didn't want and didn't use," he said. "In these rough economic times, every $1.99 counts."

The FCC this month proposed broader rules to reduce what it called "bill shock." The rules would help people avoid unexpected charges by, among other things, requiring wireless companies to send voice or text messages to customers when they approach and reach monthly limits.

The unwarranted Verizon fees showed up on bills as "pay-as-you-go" charges of $1.99 per megabyte of data downloaded by customers who did not subscribe to a data plan, the FCC said.

The agency began investigating in January after customer complaints and media reports of unexplained fees by Verizon, the nation's largest mobile provider. The agency also is investigating other wireless providers.

Consumers Union, the nonprofit publisher of Consumer Reports magazine, said it was glad to see the FCC cracking down on the fees. In a survey last month by the magazine, 1 in 5 wireless customers said they had unexpected fees on their bills in the last year.

"We've heard complaints about these kind of mystery fees from consumers all over the country," said Parul P. Desai, policy counsel for Consumers Union. "Wireless companies are running roughshod over consumers, and it's time to put a stop to it."

Among the reasons for the improper Verizon fees were data transfers started automatically by applications, such as games, that were built into phones, and failed downloads, such as unsuccessful attempts by customers to download data when there was a poor wireless signal, the FCC said.

In some cases, customers were charged for accessing websites that were touted as free of charge, such as the Verizon Wireless Mobile Web home page.

Under the consent decree, Verizon will make refunds or issue credits to customers on their October or November bills, the FCC said. Verizon said former customers would receive a letter and a refund check in the mail.

Verizon said it agreed to the settlement "even though the inaccurate billing was inadvertent."

The company has begun processing refunds, which in most cases are $2 to $6, Verizon said. It also said that in September 2009, it began giving customers a free allowance of 50 kilobytes a month to "limit further inadvertent charges."

"We are a company that listens to its customers, and in this case we got to the bottom of a problem and resolved the errors," the company said. "We have taken this action because it is the right thing to do."

Verizon has agreed to provide at least $52.8 million in refunds. The FCC said the refunds are not capped at that level.

Customers who don't get a refund or credit but believe they were improperly charged have a right to appeal and receive a good-faith review from Verizon with a decision within 30 days. The company must tell the FCC about any unresolved complaints.

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