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

[morgan_greywolf]

Except that TFA, which is Verizon Wireless to pay $25M for spurious fees, says that Verizon agreed to provide refunds to 15 million, not the 4.66 million the parent erroneously estimates. I find it very curious that Verizon is not disclosing the actual total amount of the refunds. Smells like a coverup.

Re:An insult of a fine

[Anonymous Coward]

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.'

TRANSLATION: "We accept that we got caught billing people for stuff they didn't order, and we promise to be craftier next time in hiding these 'accidental data charges' on their bills."

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

[sxeraverx]

So, for Verizon, this was a profitable venture. And profitable for whoever the fine is paid to as well, right?

Doesn't this all feel more like an incentive to continue this behavior if the full amount of the money wasn't refunded in addition to the fine?

Even if this instance weren't profitable, it'd still be incentive to continue doing other things like this. If you get caught, just pay it back, no harm no foul. And if you don't get caught, well, then you made out in the end.

Isn't this is exactly the kind of behavior that the possibility of punitive damages in a court settlement is supposed to prevent? If so, I realize punitive damages should probably only be awarded in the case of negligence, but it seems like if this has been going on for three years, it's hard to claim it's an accident and not be considered negligent in fixing it. But for some reason, the FCC decided they wouldn't pursue those damages.

IANAL, and I don't have much experience with the law, but I'm curious whether or not this still leaves Verizon open for a class action lawsuit. If this is has been going on for three years, with charges customers would have had to dispute each month, it seems like Verizon should reimburse their customers for the time they spent disputing the charges, and pay hefty punitive damages to discourage Verizon and others from doing the same thing in the future.

Assuming an average income of $32,000, and a probably conservative estimate of 15 minutes to detect, report, and rectify the the charges, each month, over 36 months, that's

$16/hour * .25hours/month * 36 months + $2/month * 36 months = $216 per person affected.

If 5% of the people were affected, that comes out to just over $1 billion in compensatory damages. On a conservative estimate.

Re:An insult of a fine

[shadowfaxcrx]

The really amusing bit is that corporations are legally considered people, unless it's disadvantageous to the corporation in a given situation. Want to donate to a politician? You're a PERSON! Want to run ads blasting another politician? You're a PERSON!

Want to avoid the felony grand theft penalties PEOPLE face when they steal millions of dollars? Oh, well, OK, I guess you're not a person until the judge makes his decision on the penalty you face.

To my way of thinking, if corporations want to be considered people, then that's fine. But if the corporation commits a crime, it goes to jail, by which I mean no business transactions except for payment of debt, at ALL, for the length of the jail sentence. Verizon steals millions of dollars? Guess what folks? You're shut down for the 1-20 year jail sentence. Yes, that will ruin you, but you're the one who wanted to be a person.

Re:An insult of a fine

[MickyTheIdiot]

That's the reality of corporate personhood in a nutshell.

All of the advantages (rights, freedoms, profits)
with none of the disadvantages (jail, death, taxes)

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

If corporations are bad actors in a country, they ought to be have their charter revoked with no enumeration to stockholders. If CEOs are so responsible for a company (as they insist every time the subject of CEO pay packages come up) then they go to jail when the company breaks the law.

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

[shentino]

I consider it malicious to be so profit driven that you willfully neglect the care required to avoid such foulups in the first place.

Tech fuckups happen, but it's still evil (tm) to just turn a blind eye and whistle innocently until someone complains about it.

Re:An insult of a fine

[shentino]

Thing is by controlling the media the corporations have the politicians by the balls, since they determine who gets air time during election season.

Pissing off (or failing to kiss up to) a corporation that is exposing you to your voters is political suicide.

And self incorporation doesn't work.

The same corporations that control the media also don't much care for small fry on their turf, and they regularly can and do litigate their competition into oblivion. It is a legal jungle out there, where survival of the fittest reigns.

Re:An insult of a fine

[Anonymous Coward]

Back when I was 17~19, I was on my dad's family plan. We got a mystery $14.99/month VPAK that appeared on multiple phones multiple times. None of us used the multimedia features of the phone, and I even went online and parental-control-banned all multimedia features from my own phone, but the charge still kept coming back. Of course, every time we complained they revoked the charge, but we had to scan our bill every month to make sure we didn't have the bogus charges.

Finally, after the charge came back at least 6 or 7 times, my dad got fed up and told Verizon that if the charge appears there one more time, he's canceling the whole family plan, and the company that he is an executive at will switch to Sprint (the company has a couple thousand verizon phones). The charge never re-appeared.

I am completely convinced that these charges are intentional, and I bet they target people who have kids and family plans, as they're more likely to blame their kids for downloading something than complain that Verizon was giving them bogus charges.

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

[erroneus]

There is no such thing as negligence on this scale. To see excess money coming in without explanation is not something that would go unnoticed for any amount of time. What's more, there were countless complaints from customers about it. Complaints that were ignored or refused in most cases. It took the FCC to get them to reverse on this. Not only should they have known on their own, but they were informed from thousands and thousands of victims and still did nothing about it.

If you really think this was just carelessness you are a complete fool.

Re:An insult of a fine

[grcumb]

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

It'd be interesting to see how much of a dent this makes in their total income - it may be feasible that this was, in fact, simply a clerical error depsite the fact it'd be huge for the vast majorit of us. This doesn't justify it, of course, but I wouldn't rush to assume it was obviously malicious and intentful.

You know, I'd love to agree with you, but tell me this: What are the odds that they would be willing to allow a clerical error that lost them a similar amount of money?

Re:An insult of a fine

[h00manist]

I think it's completely intentional. I remember seeing some business articles a few years back recommending companies to increase revenue though random fees attached to invoices, and seeing these lists of small fees added on to all my bills, feeling really helpless.

Re:An insult of a fine

[sumdumass]

Dude, pass that bong your sucking on over here.

Want to avoid the felony grand theft penalties PEOPLE face when they steal millions of dollars? Oh, well, OK, I guess you're not a person until the judge makes his decision on the penalty you face.

They are still a person in the same sense. The problem is how to you prove that they acted in a certain way instead of careless employees making mistakes or acting on their own (with and or without knowledge of the consequences)? It's very difficult. 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. Being a company doesn't shield anyone from any criminal prosecution, it shields them from criminal prosecution through an act that was no fault of their own. And even to that point, carelessness can still be grounds for criminal prosecution, just ask the CEO of Tyco and World Com.

This country is founded on the basics of being fair in out judicial system and criminal prosecution. This means actually prosecuting people who committed the crime, not some stand in who you cannot prove had any role. We do not allow corruption of blood, metaphorically or literally. Thankfully, even when they cannot prove any single person at fault, but the crime or wrong was committed, there is a legal concept called"Respondeat superior" that allows vicarious liability to wrongs committed by people that are attributed to a corporation.

To my way of thinking, if corporations want to be considered people, then that's fine. But if the corporation commits a crime, it goes to jail, by which I mean no business transactions except for payment of debt, at ALL, for the length of the jail sentence. Verizon steals millions of dollars? Guess what folks? You're shut down for the 1-20 year jail sentence. Yes, that will ruin you, but you're the one who wanted to be a person.

Obviously, you haven't thought this through much. If a company is forced to not operate, it still owes it's shareholders/owners it's value. They can simply take that and start another company with new management doing the same line of business. That's why a fine is much more valuable to prosecuting a corporation. If you wanted to impose the same general liability of "no business for 1-20 years", then fine them an amount equaling the revenue minus expenses for that time period and enforce monitoring that generates a proper attitude towards serving the public. Then if they liquidate, which even convicted felons are allowed to do if the fruit is not borne of the crime they are convicted of, the fine has top priority in payout. In other words, they cannot simply open back up under a different name because the value goes to pay the fine before being returned to shareholders or debtors. The government gets theirs first.

But in this, you are still neglecting that corporations are not sentient beings and they cannot make decisions or operate on their own. There are people running the corporation (which is the basic component structure of why corporations are necessary) and it's those who did the deed that is criminal. Justice can be served just as well by prosecuting the people directly responsible for the crime and adding vicarious liability to the corporation for failing to stop it. In this case, once the problem was legally brought to Verizon's attention, they claimed it was a mistake (prove them different with facts and not innuendos and quick conclusions) and they were willing to make full restitution. And yes, that's the entire point behind actions like this, to make the public whole again. If Verizon refused to do so, they would have been prosecuted, most likely fined, and had to give refunds anyways.

Re:An insult of a fine

[Shakrai]

and seeing these lists of small fees added on to all my bills, feeling really helpless.

A business attaching fees to your invoices is all it takes to make you feel "really helpless"? You know you could walk away from Verizon Wireless anytime you want, right? Wireless service is hardly a matter of life and death....

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

[Daniel Dvorkin]

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.

And all the customers will get ponies!

Re:An insult of a fine

[The Wild Norseman]

and seeing these lists of small fees added on to all my bills, feeling really helpless.

A business attaching fees to your invoices is all it takes to make you feel "really helpless"? You know you could walk away from Verizon Wireless anytime you want, right? Wireless service is hardly a matter of life and death....

Yup, and pay a $400 early termination fee. Man, that'll really teach Verizon a lesson!

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

[Chowderbags]

But in this, you are still neglecting that corporations are not sentient beings and they cannot make decisions or operate on their own.

Which is why corporate personhood is bullshit to begin with.

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."

No article?

[twistofsin]

Why aren't there any links to the article the summary is referring to?

Verizon also promises...

[Samantha Wright]

"...We promise we won't get caught next time."

I'd RTFA

[morgan_greywolf]

But, apparently, there is no FA to R. Way to go. tim-mahy!

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.

Inadvertent my ars

[Anonymous Coward]

My brother-in-law was on Verizon for years. Each of his phones had a button which connected to the Verizon store where you would go to buy games or ring tones or whatever. My T-Mobile phones always had t-zones buttons; same thing, no big deal. Except for on Verizon, if you didn't subscribe to a data plan, every time you pushed that button, whether intentional or not, your phone initiated a data connection to Verizon and you were hit with the $1.99 fee. I know this because every month he would call Verizon and dispute the charge and they would give him the run around for a while before apologizing and crediting his account for the charges. Because he was under contract, this continued for 2 years. I think Verizon should pay him for the many hours of his life he spent arguing on the phone with their customer service reps trying to get these charges reversed.

On an related note, he is now on T-Mobile (free mobile to mobile calling, woot!)

Right. "accidental".

[sloth jr]

If it was accidental, why didn't they voluntarily hand those "accidental" fees back? Why'd a third party have to force them to settle? Btw, here's the link to the referenced source: http://voices.washingtonpost.com/posttech/2010/10/the_federal_communications_com_5.html

Verizon: We'll pay $0.25M

[Allnighte]

"A spokesperson for Verizon has issued a report correcting the FCC, stating their settlement with the FCC was at a rate of 0.002 cents, not 0.002 dollars, bringing their total liability to $0.25M."

Re:So tell me again how Verizon is better?

[Lead Butthead]

For all those people who claim Verizon is better, it's time to wake up. All phone carriers are out to screw you. It's in their DNA. Thank goodness for number potability, so that we (the customers) can take our numbers and move it. To keep the carriers honest, everyone should change carriers every year or two. Maybe that will get them to "care" about customers.

So you play musical chair annually. How does that solve the problem? Without real competition all you're doing is paying these carriers to screw you. Don't matter which one, because they all act the same.

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.

Back-handed Apology

[DaMattster]

It sounds like Verizon is giving a back-handed apology. I think Verizon customers would like an honest to god apology and an admission of wrong doing. The public doesn't honestly believe that these errors were invadvertent so why does Verizon pretend as if they do. I fully believe these "errors" in billing were purposeful attempts to gain revenue through deception. The punishment handed down is really only a slap in the face of a billion+ revenue stream.

Re:Back-handed Apology

[hedwards]

This is America, when's the last time you received an apology? Chances are if that the answer is at all recent your either a wife or living in some other land.

Mobile ripoff industry!

[spammeister]

Once again, this makes me so glad that I'm "off the grid" and just do a pay-as-I-go a couple months a year when I need a cell phone. Canada is a bit better than the US for outragous fees. Although I'm sure 99% of Roger's customers are unsastified.

Statistical significance test

[Livius]

You know these things happen 'accidentally' because 50% of the time the error is in the customer's favour.....

Re:Statistical significance test

[jcl-xen0n]

You know these things happen 'accidentally' because 50% of the time the error is in the customer's favour.....

Haha, good point - I've personally lost count of the number of times my TelCo has given me bonus money for no good reason :}

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.

Human nature test

[Zuriel]

Have you ever complained about being undercharged for anything? If 50% of mistakes were in the customer's favour, I'd still expect 99% of complaints to be about overcharging.

Testimonial from someone who dealt with it

[Skexis]

I personally was charged about $75 in addition to my normal bill for the first two months I had Verizon. The bill simply said "internet charges" or the even more nebulous "download: music box" as a way of explaining the extra money. My phone's default settings on all of the phone's face buttons were to get me to the internet as fast as possible, and the unlock button was the thing that protruded the most from the flat part of the phone, so at first I dismissed it as the phone getting unlocked in my pocket at work. By the second month, though, I called to complain, thinking that if I was being charged all that money for a "download," as opposed to "internet usage," I should have had a program or mp3 downloaded to my phone. I said as much to the customer service agent, and she stepped away from the phone to speak with her manager. Her response, minutes later, was to offer to take half of the charges off. I replied that I would pay for the amount if, and only if, she could tell me exactly what the hell it was that I had downloaded.

A few minutes later, and she told me that all charges would be dropped. Reading this now, I'm just sorry I didn't push harder for the first month I had already paid.

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).