By Alan Zibel and Gautham Nagesh 

WASHINGTON--The U.S. consumer-finance regulator filed its first legal action against a telecommunications company on Wednesday, accusing Sprint Corp. of hitting mobile phone customers with unauthorized charges.

The Consumer Financial Protection Bureau sued the wireless carrier in federal court in New York, alleging the company unfairly charged customers by creating a billing system that allowed outside companies to place unauthorized charges on customers' bills. In addition, the Federal Communications Commission is preparing to fine Sprint $105 million over similar alleged cramming practices, The Wall Street Journal reported on Tuesday.

The CFPB alleged the company unfairly charged customers by creating a billing system that allowed outside companies to place unauthorized charges on customers' bills from 2004 through last year. Consumers were enrolled in "premium" products offering horoscopes, ringtones and digital wallpaper with charges ranging between 99 cents a month and $9.99 a month, the CFPB said.

Even though consumers complained about the practices, Sprint outsourced its billing functions and allowed unauthorized charges to be placed on consumers' bills, taking a 30% to 40% share of the revenue, the regulator said.

Sprint "invited illegal third-party charges and processed them in a highly irresponsible manner," said CFPB Director Richard Cordray.

A Sprint spokeswoman disputed the CFPB's depiction of its business practices. The company "took considerable steps to protect wireless customers from unauthorized third-party billing and is an industry leader in proactively preventing unauthorized charges," she said.

The phone-charge issue represents a new area of focus for the consumer-finance regulator. The CFPB said it has the authority to sue Sprint because the company was processing financial transactions for other companies.

Regulators have targeted a number of carriers, with the Federal Trade Commission suing T-Mobile US Inc., in addition to AT&T's settlement with the FCC.

The major wireless carriers have stopped most third-party billing after pressure from regulators. The agencies will "continue our close cooperation on this and other cases on behalf of wireless customers nationwide," an FCC spokesman said Wednesday.

Write to Alan Zibel at alan.zibel@wsj.com and Gautham Nagesh at gautham.nagesh@wsj.com

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