Verizon Wireless Fined $25 Million For Bogus Fees… But May Have Still Made Out Profitably

from the doing-the-math dept

A few weeks back, Verizon finally admitted what the press had reported for years (and which Verizon Wireless had denied for years): that it had erroneously charged 15 million customers $1.99/month fees for supposedly accessing data on their phones, even though many had specifically declined to allow data services on their phones. At the time, Verizon Wireless said it would pay back “up to $90 million.” The FCC noted that it wasn’t satisfied with this response, and now it’s come out that Verizon Wireless will also pay a $25 million fine to the federal government over these actions. That’s separate from paying back customers, but the amount Verizon Wireless will have to pay seems to be shrinking. The original report was “up to” $90 million, but now people are saying “a minimum” of $50 million in refunds. So, it’s still possible it’ll pay $90 million in refunds, but it seems unlikely.

Of course, as Broadband Reports points out, something in the math doesn’t make sense. This apparently went on for 2 to 3 years and impacted 15 million customers. While not every customer was charged the fee every month, many claim they did see it pretty much every month. So, start doing the math. Even if we assume that, say, one third of the users saw it every month for just one year and the rest saw it only once, we’re already talking $90 million. But if it’s true that many of them saw it for multiple years, and even if you throw in the $25 million fine, it sounds like Verizon Wireless could come out ahead in the end… Oh, and in case you were wondering, Karl Bode confirmed that no one at the FCC audited Verizon Wireless’s estimates for how many people were charged this fee, so it’s going on faith that Verizon Wireless — who for years denied this fee existed — is telling the truth about how many times it was charged.

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Companies: fcc, verizon wireless

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Comments on “Verizon Wireless Fined $25 Million For Bogus Fees… But May Have Still Made Out Profitably”

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out_of_the_blue says:

Mass crime pays. Steal $2 in person, jail likely.

Do it millions of times over the course of years with a *computer*, and it’s profitable.

My thought is to throw every likely Verizon exec into jail (without paying much attention to fine points: if a corporate officer, they’re corporately guilty); it’s the only measure that’s ever effective against theft on any scale.

Daddy Warbucks says:

Re: Re: Mass crime pays. Steal $2 in person, jail likely.

How do you put a corporation in jail? Campaign contributions under one of the anonymous 501(c) orgs.
501(c)(1) ? Corporations Organized Under Act of Congress (including Federal Credit Unions)
501(c)(2) ? Title Holding Corporation for Exempt Organization
501(c)(3) ? Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations
501(c)(4) ? Civic Leagues, Social Welfare Organizations, and Local Associations of Employees
501(c)(5) ? Labor, Agricultural, and Horticultural Organizations
501(c)(6) ? Business Leagues, Chambers of Commerce, Real Estate Boards, etc.
501(c)(7) ? Social and Recreational Clubs
501(c)(8) ? Fraternal Beneficiary Societies and Associations
501(c)(9) ? Voluntary Employees Beneficiary Associations
501(c)(10) ? Domestic Fraternal Societies and Associations
501(c)(11) ? Teachers’ Retirement Fund Associations
501(c)(12) ? Benevolent Life Insurance Associations, Mutual Ditch or Irrigation Companies, Mutual or Cooperative Telephone Companies, etc.
501(c)(13) ? Cemetery Companies
501(c)(14) ? State-Chartered Credit Unions, Mutual Reserve Funds
501(c)(15) ? Mutual Insurance Companies or Associations
501(c)(16) ? Cooperative Organizations to Finance Crop Operations
501(c)(17) ? Supplemental Unemployment Benefit Trusts
501(c)(18) ? Employee Funded Pension Trust (created before June 25, 1959)
501(c)(19) ? Post or Organization of Past or Present Members of the Armed Forces
501(c)(21) ? Black lung Benefit Trusts
501(c)(22) ? Withdrawal Liability Payment Fund
501(c)(23) ? Veterans Organization (created before 1880)
501(c)(25) ? Title Holding Corporations or Trusts with Multiple Parents
501(c)(26) ? State-Sponsored Organization Providing Health Coverage for High-Risk Individuals
501(c)(27) ? State-Sponsored Workers’ Compensation Reinsurance Organization
501(c)(28) ? National Railroad Retirement Investment Trust

Anonymous Coward says:

Think about it for a second. Is the consumer getting any of that money back? No.

This is sorta like the Laffer curve rehashed. The government makes it OK for you to scam the public so long as they get a cut. If they charge too much in fines hardly anyone would scam the public and so the govt will receive very few scam fees. If they charged too little they wouldn’t receive very much in scam fees either, despite the fact that now everyone is scamming the public. They have to find that sweet spot that maximizes scam fees.

Anonymous Coward says:

Re: Re:

(and the fact that the govt allows scams to continue doesn’t mean that scams continue unabated either. That is, just because scams are profitable doesn’t mean they are infinitely profitable. There is also a limit to how much you can scam the public before you start losing customers and before you start receiving an undesirable amount of public outrage).

Tim K (profile) says:

Flawed math

I found several of these charges on my wife’s phone. They did not occur every month repeatedly….maybe 2-3 times over the course of a year. I called and had the account credited, as I am sure thousands of other customers did as well. I’m not defending VZW in the least as the charges were TOTAL BS, but its pretty simple to see that Techdirt’s math is flawed by leaving out all of the credits issued to customers like myself who called to dispute the charges. The forthcoming credits are undoubtedly just to cover the millions of customers who never noticed these charges.

Matthew Polmanteer (profile) says:

Re: Flawed math

I can see your point with the numbers but it could also be possible that the number was higher. My question is why do they get to set a limit on how much they will refund. Look at the $50 million if the charge was $2/month that means this charge would have to have been applied 25 million times. Now lets say only 20% of people DON’T check their bill which would be 3 million. I’m pretty confident in reality this is much higher. If these people had the charges put on for 8.3 months we are at the $50 million mark. It’s my assumption that the reason your fee didn’t appear every month was because you called and complained. Which having this mystery fee show up once is understandable but 2-3 times a year seems a little fishy. If you look at the Maximum refund of $90 million it would only have to be on these peoples bill for 15 months. The Maximum that they are going to be forced to pay is $115 million when the maximum money they could have taken if everyone paid the fee for 3 years would be $1.08 Billion.

Now I know I’m making a lot of assumptions and don’t have actual numbers but It’s pretty easy to see that it wouldn’t take much for them to still have made a nice profit from scamming customers.

Bf says:

Re: Re: : Flawed math

it is that very attitude that corp America relies upon to steal from us everyday,,,, you gotta call, listen to the prerecorded unrelated bs , select english, reply to a gros of even more unrelated questions in order to register a complaint that will not correct the root cause, only the current complaint,,, most people don’t even bother,,, corp america fax done a great job of making Americans the worst consumers on the planet,, while we’re on the subject, how about the rewards in the form of mortgage adjustments to even the most ignorant of consumers who are reaping rewards for their over spending in the past decades,,,i managed my affairs properly and my read if that I get to pay for all the idiots
follies,,,so please, keep re electing the same thieving politicians you keep re electing time and time again even the crack users,, great job folks

Anonymous Coward says:

Former Employee

A company now owned by Xerox, ACS, has a contract to provide customer support to Verizon customers. I worked for that company until fired for giving customers refunds for these continual false charges. Between “short code” charges and “data” charges, prepaid customers who called me invariably had unexplained charges which would eat up their balance. Prepaid cell phone users generally are poor and often have as little as $10 a month to spend. This $10 would often disappear as soon as the money was placed on the phones account via a “short code” charge of $9.99 for a ring tone or a dating service. Clearly, the customer who was saving her minutes to call her sister for a few minutes throughout the month was not purchasing ring tones – yet we were told we could not credit their accounts for these false charges. Verizon knew well that the false data charges and the false short code charges were going on.

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