Image courtesy of FTC
T-Mobile made hundreds of millions of dollars by allowing known scammers to bill consumers with fraudulent unauthorized charges for text message services, the Federal Trade Commission charged Tuesday.
The FTC filed a complaint against the mobile carrier Tuesday, accusing it of knowingly profiting from the practice of allowing bogus charges to be placed on their subscribers’ bills.
“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 statement. “The FTC’s goal is to ensure that T-Mobile repays all its customers for these crammed charges.”
The FCC also announced it had launched an investigation into the T-Mobile cramming complaints, based on its work with the FTC on the case.
[Update: T-Mobile CEO John Legere called the FTC's complaint "unfounded and without merit," in a statement, saying that the agency's actions were misdirected. "T-Mobile stopped billing for these Premium SMS services last year and launched a proactive program to provide full refunds for any customer that feels that they were charged for something they did not want," he said.]
Earlier this month, T-Mobile reminded subscribers that they could be eligible for refunds for unauthorized SMS charges.
This isn’t the first time the FTC has gone after so-called mobile cramming, which is when a carrier bills a subscriber for services offered by another company, even without the consumer’s authorization. Mobile carriers get a percentage of the monthly charge.
The FTC wants T-Mobile to stop allowing so-called mobile cramming, provide refunds for all affected consumers and cough up its “ill-gotten gains.”
In this case, the FTC alleges that T-Mobile was collecting up to 40 percent of the unauthorized charges for content such as horoscopes or celebrity gossip. The charges typically cost $9.99 a month for “premium services” and were buried in phone bills in such a way that made it difficult for consumers to understand what they were paying for, the FTC said.
Even after T-Mobile learned that some services were offered by scammers, the company continued to allow the charges, sometimes for years, the FTC complaint alleges.
While T-Mobile offered refunds to some consumers, it refused refunds to others, the FTC said. The carrier directed some consumers to take up the issue with the scammers without providing contact information or offered partial refunds, according to the complaint. T-Mobile also allegedly claimed some subscribers had authorized the charges despite having no proof that they had done so.
Last fall, T-Mobile and the other top three U.S. wireless carriers announced plans to stop billing for premium text message services because of problems with fraud. The carriers said they’d still allow the billing service to be used for charitable purposes.