Federal agencies target 'Un-carrier' T-Mobile for un-customer-friendly practice of cramming
Despite its portrayal as being a new kind of carrier focused on the customer, T-Mobile USA is being accused by the Federal Trade Commission of the time-honored carrier practice of "cramming" customers' phone bills with bogus charges.
In addition, the Federal Communications Commission said it is investigating T-Mobile for the same practice and is coordinating its efforts with the FTC. While the consumer protection agency does not have authority to impose fines on carriers, the FCC does have the authority and has imposed more than $33 million in fines on carriers for cramming.
On Wednesday, the FTC filed a complaint in U.S. federal court alleging that T-Mobile made "hundreds of millions of dollars" by charging customers for premium services that they didn't order. The commission says that T-Mobile pocketed 35 percent to 40 percent of the bogus charges, which included subscriptions to third-party services such as flirting tips, horoscope information and celebrity gossip that cost $9.99 per month.
The FTC alleges that T-Mobile's billing practices made it difficult for customers to detect the scam. The bogus charges were included on the bill's summary page in a category called Use Charges. Even if the customer tried to determine what the Use Charges were for, the bill's Premium Charges section did not explain what the charges were for or that they were recurring charges. In addition, prepaid customers who did not receive a bill had the charges deducted without their knowledge.
"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. The FTC's goal is to ensure that T-Mobile repays all its customers for these crammed charges," says FTC Chairwoman Edith Ramirez.
For its part, T-Mobile says that the FTC's complaint is "unfounded and without merit." The company said that it stopped billing for these third-party services last year when it found out about them and refunded customers for any charges they did not authorize.
"As the Un-carrier, we believe that customers should only pay for what they want and what they sign up for. We exited this business late last year, and announced an aggressive program to take care of customers and we are disappointed that the FTC has instead chosen to file this sensationalized legal action. We are the first to take action for the consumer and I am calling for the entire industry to do the same," says John Legere, T-Mobile USA's idiosyncratic CEO.
However, the FTC alleges that T-Mobile dragged its feet on providing refunds, paying only partial refunds to some customers and telling others to get reimbursed from the scammers directly, without providing accurate contact information.
Whether the FTC complaint and the FCC investigation will affect the efforts by Japan's Softbank and its U.S. unit Sprint to acquire T-Mobile remains to be seen.