Carrier to pay at least $90 million in refunds, $22.5 million in fines
Despite claims of a conspiracy, T-Mobile US today came to an agreement with the Federal Trade Commission to pay at least $22.5 million in fines tied to bill cramming.
As part of the settlement, T-Mobile US will fully refund customers for unwanted third-party charges, totaling at least $90 million. T-Mobile US will also pay $18 million in fines and penalties to attorneys general in all 50 states and the District of Columbia and a $4.5 million fine to the Federal Communications Commission.
The FTC initially brought up the claims in July that T-Mobile US had raked in “hundreds of millions of dollars” tied to fraudulent premium messaging charges from third-party content providers. In its complaint, the FTC said T-Mobile US acted as the billing agent for such services, which in some cases had refund rates as high as 40%. The FTC claims such a high refund rate was “an obvious sign to T-Mobile that the charges were never authorized by its customers,” and that internal documents showed that the carrier had received a “high number of consumer complaints at least as early as 2012.”
More damaging for T-Mobile US, the FTC said that once notified by customers about the fraudulent charges, T-Mobile US “in many cases failed to provide consumers with full refunds. Indeed, the FTC charged that 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.”
Excerpts from an actual T-Mobile bill showing cramming charges.
Source: FTC
Outspoken T-Mobile US CEO John Legere quickly went on the offensive, claiming the allegations were prompted by lobbying efforts from the carrier’s rivals and that monetary claims made by the FTC were “incredibly overstated.”
“We all got to see Washington politics and the big carrier lobbyists at their best,” Legere started. “While I love our democracy, I hate the way D.C. works sometimes, and I just could not sit still and let them get away with it.”
Legere went on to claim that the FTC “did a great job sensationalizing their story and their news at the expense of both T-Mobile’s reputation and mine,” and that he could not sit aside and not respond.
Despite the conspiracy claim, Legere explained that indeed T-Mobile US between 2009 and last year did provide billing services for premium messaging companies, a practice known as “billing on behalf of,” which was done by a number of operators looking to profit from the rise in over-the-top services. Legere noted that those premium messaging companies were the ones responsible for gaining approval from T-Mobile US’ customers in order to bill for the services, which is where the fraudulent controversy comes in.
“As we all know now, there were some fraudsters in that bunch,” Legere explained. “That is why, as we found them, we terminated them and, ultimately, made the decision in November 2013, as did all four of the wireless companies, to eliminate this from our service offerings.”
T-Mobile US announced in June that it would begin reaching out to customers that may have been incorrectly charged for third-party, premium messaging services that the carrier used to allow access to through its billing platform.
FCC Commissioners voted unanimously in favor of the fine.
“Yet again we are faced with a phone company that profited while its customers were fleeced by third parties who placed unauthorized charges on their phone bills,” said Travis LeBlanc, chief of the FCC’s Enforcement Bureau. “And once again the FCC is standing up for those customers. Today’s settlement holds T-Mobile responsible for its billing practices and puts money directly back into the pockets of American consumers.”
Bill cramming has been a hot topic as of late as the FCC in October fined AT&T Mobility a record $105 million tied to the practice. Sprint is also reported to be in line for a similar fine, with the Consumer Financial Protection Bureau this week filing a lawsuit against Sprint.
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