Verizon To Pay $25M For Years of 'Mystery Fees'

Ponca City writes "The Washington Post reports that the FCC has reached a record $25 million settlement with Verizon Wireless over the company's wrongly charging subscribers 'mystery' Internet fees over the past several years — the largest settlement in FCC history. With the action, Verizon Wireless's total costs associated with false data fees reached $77.8 million, one of the largest payouts for false business practices in the communications services industry. '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,' says FCC Chairman Julius Genachowski. 'In these rough economic times, every $1.99 counts.' Verizon Wireless said in a news release that its overcharges were inadvertent. 'We accept responsibility for those errors, and apologize to our customers who received accidental data charges on their bills.'"

Comments

An insult of a fine

[Sonny Yatsen]

It should also be noted that Verizon, as part of the settlement, is also refunding $52.8 million to their customers. But let's look at this more closely, shall we?

Verizon Wireless has 93.2 million subscribers. Let's assume (VERY conservatively) that only 5% of their customers were hit with bogus fees. Let's also assume that everyone who was overcharged was overcharged the bogus fee of $1.99 per month. The period in which the bogus fees were charged was about 3 years.

So we have: 4.66 million (or 5% of the customers) * (1.99 * 36) = 333,842,400 dollars. And that's the REALLY conservative estimate.
If every one of Verizon's consumers were overcharged $1.99 for 3 years, then that would come out to be 6,676,848,000 dollars.

So, for 3 years, they plundered their customers with bogus fees and now they're walking away paying back less than 1/3rd of the REALLY LOW END estimate of their misbegotten gains. No wonder companies act so egregiously bad! Why would they have to do things according to the law if they'll make more by breaking the law than they'll ever have to pay back in fees?

I like how they characterized it as just some clerical mistake. I wish I made clerical mistakes that can net me $300 million dollars.

Re:An insult of a fine

[Shakrai]

Verizon Wireless has 93.2 million subscribers. Let's assume (VERY conservatively) that only 5% of their customers were hit with bogus fees.

Well, not to defend Verizon, but 5% sounds about right to me. Between my family share plan (5 lines) and my corporate plan at work (46 lines) I've only seen this issue happen on two lines (2 / 51 = 3.9%).

It seems to be related to the inability of Verizon's billing system to properly determine the source of data. As an example, their backup assistant application is supposed to be completely free but I've seen it generate data charges before. Their billing system is supposed to discount very quick data sessions but I've seen phones hit with this fee when someone accidentally hit the "mobile web" button and exited out of it right away.

To Verizon's credit they never once argued with me when I called to request a refund of this fee. I did so every single time I saw it charged and received a refund every single time. In spite of those refunds I still got the credit from for this fee. Go figure.

Re:An insult of a fine

[rm999]

"Let's also assume that everyone who was overcharged was overcharged the bogus fee of $1.99 per month. The period in which the bogus fees were charged was about 3 years."

Wrong assumption. I am one of the people who got charged the fee, but it only happened once or twice in a three year period. You only get the fee the months you accidentally pressed the button. The issue is that pressing the button loads a webpage, which uses up ~0.5 kb. Then, Verizon rounded that up to 1 MB, and charged a couple of bucks.

Re:An insult of a fine

[numbski]

Isn't this is exactly the kind of behavior that the possibility of punitive damages in a court settlement is supposed to prevent?

You're forgetting the *settlement* part. Not a judgement. A judgement can carry punitive damages. A settlement is whatever the parties agree to outside of court.

Re:An insult of a fine

[erroneus]

I, on the other hand, have witnessed problems with every line of Verizon service where I work. That is everything from Verizon Wireless to T1 to OC3 and MPLS services. Verizon billed another company for our service for almost 3 months. And for the services we have there are always unanswered and "unanswerable" items on our bills. We are presently in a dispute state meaning they can't turn our service off for non-payment which is part of their standard agreement. I would urge you do the same on your business accounts with issues. What's weirder still, in spite of the fact that no representative can explain the strange charges, they insist that we owe them. Imagine that? We owe something that no one understands? Not even Verizon? Really.

I will never willingly be a Verizon customer.

Re:An insult of a fine

[Reaperducer]

(And don't say they pay taxes. The majority of corporations in the U.S. pay no taxes AT ALL).

This is false. It's just something that politicians say to get under-thinking voters riled up. And then the under-thinkers latch on to this and repeat it as if it was fact. You obviously have never owned or run a company.

Re:An insult of a fine

[IICV]

But rest assures, if there is proof that a CEO, Board Member, or any Manager gave orders to fleece the public, those people can and will be held criminally accountable.

Good lord, do you really think that the only way for the public to be fleeced is for a C level executive to give written orders to do it?

Here's a scenario: John the CTO goes down to the billing engineers and tells them, verbally, "we want to see a 5% increase in profits from spurious charges. Make it happen."

This isn't written down anywhere. The meeting happened, but it was just a generic meeting with the team - nothing special, nothing permanent. Other business was covered too. How do you prove he said that?

Here's an even more common scenario: Joe the CEO tell John the CTO, "We're making money hand over fist. I want to make even more. Make it happen." So John the CTO runs his billing engineers ragged, and randomly weird charges and weird discounts start cropping up in people's phone bills. He throws fits about the weird discounts, they get fixed, but the weird charges - well, nobody really cares about them in the billing department, that's accounting's job.

I mean, how do you think horribly defective products like the Ford Pinto make it to the market? Most of the time, it's not because the people engineering them suck - it's because management, up above them, is driving the engineers too hard.

This is why I, personally, think we should really start increasing the amount of personal liability that managers high up in corporations are exposed to. Right now there is basically no penalty to saying "ship it now nerdboys, who cares if it might explode?" besides perhaps tarnishing the company's reputation (and who cares about that? Reputation is a currency traded on the order of decades, and you won't be around any more by that point). If there were actual, personal penalties for your company shipping a defective product (or fraudulently billing people, or accidentally sourcing from a Chinese factory that uses lead paint), then managers would make damn sure that what they're doing is right.

I mean, that's the normal argument for why CEOs make so much money, right? That they have far more riding on their shoulders? Why don't we make that argument true in fact, instead of just true in theory?

Re:An insult of a fine

[SharpFang]

Unfortunately, proofs of said activity will be released only by order of the very people who committed the crime. The corporation can make it as easy or as difficult (impossible) for the investigator to gather proofs on selected employees. Papers get displaced, entries get deleted, witnesses know nothing, people who might know a thing are transferred to a unit in Paraguay, and the conclusion of the investigation is "general incompetence caused the mistake, and I wonder how such a mess of a company can act at all".

Nope, you must be really, really willing to lose your job, chance to be employed by others in the industry and risk lawsuits on bogus charges from your employer, if you, as an employee want to let investigators know -who- personally is responsible.

Unless, of course, that person was out of favor, and is the designated scapegoat.

Re:An insult of a fine

[shadowfaxcrx]

This is the same utter BS that the Republicans have been trying to convince us of for over 3 decades.

I'm not going to bother dissecting your post point by point, but I will make a couple observations:

First, Verizon isn't making the public whole. That's the whole point of Sonny's post. They're paying back less than a third of the *conservative* estimate of what they stole. That sounds like a great arrangement to me. Hell, I'd be happy to rob 30 grand from a bank, and then give them 10 grand back and have the case be dropped. That's a great way to make a quick 20 thou. Funny how Verizon gets away with it, but I'd be in jail for decades.

Which brings me to my second: What was that you were saying about being fair in our judicial system and criminal prosecution?

Then you bring up the tired old Republican line of "Fines are REALLY punitive and REALLY teach corporations lessons." That's a load of crap. Microsoft made $6.66 BILLION in pure profit in Q42009. If they commit a crime and we fine them even a hundred million, which is a level of fine we almost never see levied on corporations, they will earn it back in about a day and a half. That's not a penalty. It's a minor annoyance.

The idea that fining corporations will make them behave is total crap, as has been proven by the bevy of corporations who illegally screw their customers despite the "awful, damaging fines."

Well, duh.

[Oxford_Comma_Lover]

> Verizon Wireless said in a news release that its overcharges were inadvertent.

Also, Bank of America is kindhearted and bankrolls Santa's elves.

Oblig.

[ittybad]

http://www.verizonmath.com/
Quote: George Vaccaro wanted to point out to Verizon that they were saying ".002 cents" and meaning to say ".002 dollars" but he found that every single person at Verizon did not understand the difference

Audio and (I believe) transcript available. It is painful.

AT&T is doing it now

[Mr. Competence]

I just got a refund from AT&T because of an issue like this with my iPhone 4. I turned all data access off (e.g. if I didn't have WIFI access I would get a dialog about cell data being off) and yet I was getting hit for 0.8MB/day while it was off. According to the AT&T person, it is because the iPhone sends out data to see if the data service is available! There are even discussions about it on Apple's site.

Re:PROFIT!

[tophermeyer]

I had some billing disputes with VZW in the past, and that's exactly how they did it.

As far as I can remember, the only time I've ever had a wireless company actually cut me a check was when I got back the deposit from my very first cell phone contract (I was too young to pass a credit check at the time).