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

from the doing-the-math dept

Thu, Oct 28th 2010 4:56pm — Mike Masnick

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.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: fees, fine
Companies: fcc, verizon wireless

30 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

Anonymous Coward, 28 Oct 2010 @ 5:08pm

:-/ @s not even news @ this point. We just expect to get fucked, and we all know that the government's in on it. Integrity has no lobby.
[ link to this | view in thread ]
DataShade (profile), 28 Oct 2010 @ 5:34pm

Clarification: it wasn't $1.99/mo. It was $1.99 per phantom data access. I'm still looking through all my old VW bills, but I found six charges in a single month - for a non-smartphone, on an account where I spent the time calling into Verizon customer service to have texting and everything else turned off.
[ link to this | view in thread ]
ChurchHatesTucker (profile), 28 Oct 2010 @ 5:36pm

This is my shocked face
It's amazing what you can buy for some steak dinners at Dupont Circle.
[ link to this | view in thread ]
abc gum, 28 Oct 2010 @ 5:58pm

Everytime one of those bogus charges showed up in the bill, I called and it was removed. Verizon did get a small interest free loan though.
[ link to this | view in thread ]
Anonymous Coward, 28 Oct 2010 @ 6:30pm

Oh, and in case you were wonder...
[ link to this | view in thread ]
out_of_the_blue, 28 Oct 2010 @ 7:10pm

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.
[ link to this | view in thread ]
Anonymous Coward, 28 Oct 2010 @ 7:41pm

gotta love those wiggle words, Never letting go of a cent if they can help it
[ link to this | view in thread ]
Anonymous Coward, 28 Oct 2010 @ 7:56pm

Those fees are nothing compare to the brutal rip off that consumers endure at the hands of those telcos.

In the U.K. Virgin is being shamed by BT for selling a 100Mb/s for $75 bucks when they price theirs at $40, but 50 Mb/s on Verizon costs just $144 LoL

The U.S. is a third word on this front I'm afraid.
[ link to this | view in thread ]
Anonymous Coward, 28 Oct 2010 @ 7:57pm

*third world
[ link to this | view in thread ]
Anonymous Coward, 28 Oct 2010 @ 8:05pm

Fines are just the cost of doing business.
[ link to this | view in thread ]
Anonymous Coward, 28 Oct 2010 @ 8:13pm

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.
[ link to this | view in thread ]
Anonymous Coward, 28 Oct 2010 @ 8:18pm

Verizon is definetly not in the "cool ISP" list.
[ link to this | view in thread ]
Anonymous Coward, 28 Oct 2010 @ 8:24pm

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).
[ link to this | view in thread ]
Anonymous Coward, 28 Oct 2010 @ 8:30pm

Ordinary citizen steals millions: gets 20 years in jail.

Corporation steals millions: pays a fine that is less than what they make in a week, and goes on with business as usual.

God bless America.
[ link to this | view in thread ]
Anonymous Coward, 28 Oct 2010 @ 8:56pm

Re:
Corporations have more rights than citizens.
[ link to this | view in thread ]
Anonymous Coward, 28 Oct 2010 @ 9:03pm

Re: Mass crime pays. Steal $2 in person, jail likely.
Since corporations are people now, perhaps we can just throw Verizon in jail.
[ link to this | view in thread ]
SLK8ne, 28 Oct 2010 @ 10:20pm

Being planless is good
I use a pay as you go phone, and look on my fellow "contract slaves" with some pity. I may not have the bells and whistles, but, I got no overt corporate rip offs either. Have a good day, if you can hear me now....
[ link to this | view in thread ]
Daddy Warbucks, 29 Oct 2010 @ 12:18am

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
[ link to this | view in thread ]
abc gum, 29 Oct 2010 @ 5:00am

Re: Re: Re: Mass crime pays. Steal $2 in person, jail likely.
The point being - Corps are not people.
[ link to this | view in thread ]
Anonymous Coward, 29 Oct 2010 @ 5:04am

Re: Re:
orps are Super People, they should be required to wear spandex and a cape.
[ link to this | view in thread ]
Matt Polmanteer, 29 Oct 2010 @ 6:04am

Corporate Welfare
And this is now how our system works. If your going to rip people off you just have to do it big enough. Average Americans would be charged with fraud and placed in jail where as a big corporation gets a slap on the wrist for a fraction of the money stolen. This is hardly anything new for the american corporate world.
[ link to this | view in thread ]
Tim K (profile), 29 Oct 2010 @ 6:37am

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.
[ link to this | view in thread ]
Matthew Polmanteer, 29 Oct 2010 @ 7:51am

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.
[ link to this | view in thread ]
Anonymous Coward, 29 Oct 2010 @ 10:08am

This case is actually perfect for a class action lawsuit. Sure, the lawyers will get all the money, but consumers won't get their money back anyway.

File the lawsuit and them ask for every customer bill (names excluded of course) for the past 15 years. That by itself should be worth $100 million.
[ link to this | view in thread ]
tax cpe, 31 Oct 2010 @ 7:43pm

Re:
This makes what they stole even more bigger, doesn't it?
[ link to this | view in thread ]
Ann S, 3 Nov 2010 @ 2:06am

Funds for a Verizon Prepaid
OK I have had an account on-line with verizon for my pics. Does this count for all the $1.00 screwed phone minutes that I have had in the past. I noticed this ages ago and now it is brought into the attention to refund this mess.
Do I qualify? 714-328-24.. Please contact me.
Thank-you, Ann
[ link to this | view in thread ]
Anonymous, 2 Dec 2010 @ 7:34pm

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.
[ link to this | view in thread ]
Anonymous Coward, 29 Jan 2011 @ 8:57pm

More bigger, more better!
[ link to this | view in thread ]
Bf, 5 Apr 2011 @ 10:46am

: 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
[ link to this | view in thread ]
MR D, 22 Nov 2011 @ 10:31am

Coorporate Greed Continues
Verizon Wireless is what corporate greed stands for.
They pay their own employees weak, then rip them off with fake charge backs and coruption among its higher managing group.
Do yourselves a favor ..do not get Verizon Wireless...they treat thier own employees like dirt and they are ripping you off any chance they get.
[ link to this | view in thread ]