The US Federal Trade Commission on Tuesday accused T-Mobile of secretly "cramming" spurious and unauthorized charges into customer cell phone bills, earning hundreds of millions of dollars in the process. The agency would like to see a federal court force T-Mobile to repay the bogus fees to customers and change its business practices.
"It's wrong for a company like T-Mobile to profit from scams against its customers when there were clear warning signs the charges it was imposing were fraudulent," FTC chairwoman Edith Ramirez said in a prepared statement. "The FTC's goal is to ensure that T-Mobile repays all its customers for these crammed charges."
According to the FTC, T-Mobile earned 35 to 40 percent of the total amount charged to consumers for such bogus third-party services as "flirting tips, horoscope information or celebrity gossip," which typically cost $9.99 per month. These third-party services piggyback on a customer's normal monthly bill from the carrier, so many people aren't even aware that their bill has been "crammed" with unwanted and unauthorized additional charges.
Given the 40 percent refund rate on such services, T-Mobile was clearly aware that these services were bogus, but it continued to allow them because of the amount of money it was earning from unsuspecting customers. And that 40 percent rate only represents the customers who actually complained: Many more customers have been unknowingly paying spurious third-party service charges for years.
Worse, T-Mobile actually worked to hide these charges from customers. The FTC says that the firm did not show consumers that they were being charged by a third party, or that the charge was part of a recurring subscription, when viewing their bills online. No matter how much customers investigated their bill, they could never see the individual charges.
And if customers viewed a paper version of their bill, which is often over 50 pages long, they would need to dive deep to find a "premium services" portion of the bill which listed only abbreviated information about these charges. The FTC notes that such third-party services were often identified by names like "8888906150BrnStorm23918" specifically so that customers couldn't identify them. And pity the poor pre-paid customers, who don't even receive monthly bill statements.
Worse still, when confronted by the spurious charges, T-Mobile rarely provided refunds to customers. "T-Mobile refused refunds to some customers, offering only partial refunds of two months' worth of the charges to others, and in other cases instructed consumers to seek refunds directly from the scammers – without providing accurate contact information to do so," the FTC charges. The FTC also notes that T-Mobile lied to it when the company claimed that the customers had authorized certain charges but was then unable to demonstrate how and where that had happened.
Despite the voluminous charges, T-Mobile says it's done nothing wrong and that the scrappy wireless carrier—which battles the much bigger Verizon Wireless and AT&T Wireless for customers—should be applauded, not attacked.
"We are disappointed that the FTC has chosen to file this action against the most pro-consumer company in the industry rather than the real bad actors," T-Mobile CEO John Legere said. "The FTC's lawsuit seeking to hold T-Mobile responsible for their acts is not only factually and legally unfounded, but also misdirected."
Apprised of the FTC investigation as early as 2012, T-Mobile in November 2013 finally announced that it would no longer allow third-party "premium" services to piggyback on customer bills. But it has resisted settlement overtures from the agency and will now face the US government in court.