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

[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

[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

[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

[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.

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."

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 :}