Verizon Cancels $2 ‘Convenience Fee’ After Backlash

By Alex Sherman - Dec 31, 2011 5:20 AM GMT+0700

Verizon Wireless (VZ), the largest U.S. mobile carrier, canceled a planned $2 “convenience fee” for online and phone bill payments after a backlash from consumers and scrutiny from the Federal Communications Commission.

The company reversed its decision after just one day in response to customer feedback, according to a statement on its website today. Basking Ridge, New Jersey-based Verizon Wireless had announced the fee yesterday for users who make single bill payments on a month-to-month basis online or by phone.

Customers began criticizing Verizon Wireless on Twitter and Web forums after the company disclosed the fee, with some setting up online petitions and calling for consumers to boycott the carrier. The FCC today said it was “concerned” about the plan and that it would investigate.

“Companies used to think they could get away with putting out unpopular policies,” said Brianna Cayo Cotter, a spokeswoman for Change.org, a website that lets people start online campaigns. “Today, hundreds of thousands of people can mobilize and change policies in a matter of hours. That’s what we’re seeing with Verizon.”

Verizon Wireless customers started more than 35 petitions on Change.org against the fee, including one that was joined by more than 95,000 people within hours.

Last month, a consumer backlash led to Bank of America Corp. canceling a $5-per-month fee for debit card users. In that case, too, consumers used online campaigns to pressure the company.

‘Predatory Practices’

“When consumers speak against what they see as predatory practices, quite often they can help change them,” said Joe Ridout, consumer services manager at Consumer Action, a consumer-rights group. “Verizon responding as soon as they did is a point in their favor. It prevented people from actually being charged and it showed they were listening.”

Verizon Wireless said yesterday it planned to add the fee to address costs it incurs for processing the single payments. The charge wouldn’t have applied to customers who enroll in automatic payment plans, use electronic checks, pay at a Verizon Wireless store, send in checks or pay through online banking websites.

“The best path forward is to encourage customers to take advantage of the best and most efficient options, eliminating the need to institute the fee at this time,” Dan Mead, Verizon Wireless chief executive officer, said in today’s statement.

Verizon Communications Inc., which co-owns the wireless business with Vodafone Group Plc, rose (VZ) 0.2 percent to $40.12 at the close in New York. The stock advanced 12 percent this year.

Verizon Wireless is driving up profit at parent Verizon Communications as it gains users for Apple Inc.’s iPhone and Google Inc. Android devices, which let users browse the Web, watch video and stream music. Third-quarter net income at New York-based Verizon Communications doubled to $1.38 billion from $659 million a year earlier.

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net