Verizon Settles ‘Cramming’ Lawsuit
Verizon will offer 100 percent refunds for unauthorized third-party charges to landline customers, a practice known as “cramming,” said a settlement released late Wednesday. The telco will also implement several reforms designed to eliminate cramming. The nationwide settlement is the result of a 2009 lawsuit alleging Verizon billed its landline phone customers for charges from third-party companies not authorized by the customer, in violation of federal and state law. “If we went to trial and won, we couldn’t have done better,” lead class counsel John Jacobs told us. “It’s a fabulous, fabulous settlement. It’s remarkable."
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"Verizon does not tolerate cramming,” Verizon spokesman Bob Elek said. “This settlement recognizes that some of our wireline customers were subject to cramming by third-party services providers, and provides another way to make customers whole for those unwarranted charges, in addition to the process we offer any customer today who tells us they have been crammed.” The FCC Consumer and Governmental Affairs Bureau is analyzing comments on cramming in general and is looking to move toward a final rulemaking, Bureau Chief Joel Gurin has said (CD Feb 9 p3).
The settlement covers all unauthorized third-party charges incurred between April 27, 2005, and Feb. 28, 2012. The class includes individuals, businesses and local governmental entities. Customers will be able to request a summary of all third-party charges via an 800 number, or at www.verizonthirdpartybillingsettlement.com, both of which will be operational March 9. In lieu of total refunds of unauthorized charges, customers can also opt for a $40 flat claim.
"There’s more than a billion dollars in third-party charges involved,” Jacobs said. “How much of those are unauthorized? We don’t know yet. That remains to be seen. But the important part about this settlement is there is no limit on how much Verizon has to pay under the settlement.” According to class counsel Bryan Kolton, some individuals could have claims for hundreds or thousands of dollars in refunds. “Verizon deserves a tremendous amount of credit here,” Jacobs said.
Starting immediately, anyone opening an account with Verizon will have to affirmatively state whether they will allow third-party charges. Courts and attorneys general have said cramming has flourished because most people don’t even know that third-party charges can be put on a customer’s bill, Jacobs said. “This is going to go a huge way toward stopping that."
Verizon will also send notices informing their current customers that they have the right to block third-party charges for free by calling a 1-800 number, according to the settlement. If any third-party company proposes to add a third-party charge to the bill, it will have to send the customer a letter with “Important Information About New Charges on Your Verizon Bill” stamped on the envelope. “The telephone industry up til now has been resistant to any meaningful change,” Jacobs said. “Verizon stepped up to the plate.” Elek said Verizon has offered a free “Bill Block” service since 1999, which prevents companies from cramming without a customer’s permission. Customers must request the service. Also in place since 1999, Verizon’s “first call resolution policy” reverses charges “no questions asked,” Elek said. The telco regularly investigates third-party service providers to ensure compliance with proper billing practices, and revokes billing privileges of those who “exceed our stringent cramming requirements,” he said.
Cramming can cause Verizon to lose customers, and the company takes an aggressive stance, but cramming complaints “represent less than 1 percent of overall bills Verizon sends to customers,” Elek said. “One of the reasons that cramming has increased so exponentially is that plaintiffs have had a very hard time getting courts to certify a class,” Jacobs said. Courts have been reluctant to grant class certification because classes aren’t a proper vehicle where individual questions predominate, he said. It would have been difficult to get the class certified if Verizon hadn’t agreed to the class definition in the settlement, he said. The four law firms representing the plaintiff’s class will split the $7.5 million attorney fees.