T-Mobile’s success positioning itself as a customer-friendly wireless carrier may take a hit from new FTC charges alleging that T-Mobile “crammed” sketchy charges onto customer bills.
The Bellevue-based company “disregarded telltale signs of fraud” and continued to bill customers $9.99 per month for services such as SMS horoscopes and celebrity gossip, according to FTC Consumer Protection Director Jessica Rich.
T-Mobile Chief Executive John Legere lashed back, calling the FTC’s complaint “unfounded and without merit.”
“In fact 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 in a prepared statement.
The FTC said T-Mobile received a 35 to 40 percent cut of the charges, which began as far back as 2009.
Charges for these services were obscured on lengthy bills, the FTC alleged. Customers who found the charges had difficulty obtaining refunds from T-Mobile, which refused refunds to some and offered only partial refunds to others, Rich said.
The practice, known as “cramming,” has been a longstanding concern of the FTC, which earlier filed suit against alleged cramming operations. T-Mobile continued to bill customers for services of those defendants, the FTC said in its announcement.
Rich said on a conference call that “it’s wrong for a company like T-Mobile to profit from third-party charges” when there are clear signs of fraud.
In a lawsuit filed in Seattle today, the agency is seeking restitution for the charges that have generated “hundreds of millions” in profit for T-Mobile, Rich said.
Over the past two years T-Mobile has repositioned itself as a champion of the consumer and disrupted the industry by decoupling phone hardware from wireless plans and phasing out restrictive contracts.
Legere highlighted that work in his response to the FTC complaint.
“T-Mobile is fighting harder than any of the carriers to change the way the wireless industry operates, and 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,” he said.
In his statement, Legere agreed with the FTC that “not all of these third-party providers acted responsibly,” but he said they, not T-Mobile, should be held accountable.
Perhaps in anticipation of the FTC action, the company on June 10 announced it would notify current and former customers who paid for these services and tell them how to request a summary of the charges and request a refund. The notifications are to happen between July and September.
Consumers are usually prompted by online ads to sign up for the services. They’re supposed opt-in to the services twice, at which point the service provider notifies T-Mobile and charges are added to the consumer’s monthly bill.
But the rules aren’t always followed, according to Brian Shull of the FTC’s consumer protection bureau.
“In many cases what we’ve found is that the third party merchant doesn’t actually get consumers’ authorization,” he said.“They’re either using deceptive advertising … or in many instances they’re just buying phone numbers from random places and billing these consumers.”
The FTC is alleging T-Mobile enabled these shady services and made it difficult for consumers to discover and remove the charges.
But consumers also need to be diligent to prevent cramming.
Rich said wireless consumers in general “should read their bills closely, and they should quickly contact any carrier when they see unauthorized charges on it, and they should do so quickly” in case there is a time limit on requesting refunds.
The FTC also recommends that customers ask their carriers to block all third-party charges from their bills, she said.