Federal regulators on Tuesday accused T-Mobile of bilking customers out of hundreds of millions of dollars in third-party charges on phone bills for premium services such as flirting tips and celebrity gossip that customers never authorized.
In a lawsuit filed in Seattle, the Federal Trade Commission said T-Mobile engaged in a practice known as cramming: putting unauthorized, misleading or deceptive charges on phone bills.
Customers typically were billed $9.99 a month for the SMS text message subscriptions from third-party providers. T-Mobile received 35% to 40% of the fees, with the rest going to the provider of the service.
T-Mobile did not obtain permission from customers for the charges, which were “nearly impossible” to notice because they were buried in lengthy bills, the FTC said. The improper charges date to at least 2009 and the company should have known the charges were unauthorized because of high requests from consumers for refunds.
“It’s wrong for a company like T-Mobile to profit from third-party charges when there were clear warning signs those charges were fraudulent,” said Jessica Rich, the agency’s consumer protection director.
“We will be seeking refunds for consumers and hopefully we’ll get consumers’ money back,” she said.
Also Tuesday, the Federal Communications Commission said it launched an investigation into cramming complaints against T-Mobile. The agency shares jurisdiction on the issue with the FTC and has the ability to levy fines for unauthorized charges.
The two agencys have been cracking down on cramming, which was a common practice on landline telephones and now is showing signs of spreading to mobile phones.
In November, T-Mobile joined the three other major wireless carriers -- AT&T, Sprint and Verizon -- in announcing they would stop billing for most premium third-party text messaging services because of the risk of fraud.
“We believe in making things right for our customers,” T-Mobile Chief Executive John Legere tweeted at the time. The company also set up a refund program for customers who believed they were improperly charged.
Legere on Tuesday said the FTC's "sensationalized" complaint was "unfounded and without merit."
In a statement, he said the company said it stopped billing for premium text message 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."
"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," Legere said.
Rich said FTC officials engaged in talks with T-Mobile about settling the allegations but were unable to reach a deal.
The agency hoped the suit would send a “strong message” to other wireless providers that cramming would be punished, Rich said.Copyright © 2015, CT Now
1:34 p.m.: This post was updated to add T-Mobile comments about the FCC investigation.
12:37 p.m.: This post was updated to add additional detail from the FTC.
12:15 p.m.: This post was updated to add FTC comments from a conference call.
12:07 p.m.: This post was updated to add FTC comments from a conference call.
12:01 p.m.: This post was updated to add FTC comments from a conference call.
11:56 a.m.: This post was updated to add FTC comments.
The first version of this post was published at 11:34 a.m.