If this phone is new, it is under warranty.
I think it is warrantied for at least 90 days, maybe a year.
If not under warranty, then either replace it with a system compatible device (so that you can keep your network and plan) from Wal-Mart or the like for about $40.
If you have a blank SD card, you can install it and reformat it as internal memory.
A high speed card is recommended.
This will greatly expand the capacity of this device, but the card will not be compatible with other devices.
I have a VLE5 and I have had the same issue, but it turned out to be apps that I had installed.
I guess in your case that is ruled out due to the factory reset?
Anyway, although it is limited, I have had good luck with mine.