New York Attorney General, Eric Schneiderman, is now involved in a dispute between T-Mobile US and a group of consumer organizations who claim the company’s no contract ads are deceptive and its “abusive pattern of debt collection practices.”
Consumer and labor watchdog Change to Win Retail initiatives joined the Public Citizen, Color of Change, League of United Latin American Citizens and Consumer Federation of California to file a formal complaint with the Consumer Financial Protection Bureau (CFPB).
In the complaints, the organizations say T-Mobile US exploits low-income communities and communities of color with its deceptive “no contract” ads, which they claim can often lead to hundreds or thousands of dollars in unexpected expenses.
“We ask T-Mobile to reform its own practices by no longer using the misleading language around no contracts,” Nell Geiser, a research director with Change to Win said. ”We ask that it stop claiming that it pays customers’ early termination fees,” she said. The group also plans to bring a complaint to the Federal Communications Commission, which investigates potentially misleading advertising.
The watchdog organizations say the no contract ads are misleading because often times customers become locked into phone lease agreements and equipment installment plans that essentially function like a contract. They say roughly 90 percent of customers enter into contracts with financial penalties for early termination.
Customers who break the financing agreements get slapped with large fees they cannot pay and end up in debt collection. 49% of consumers with issues related to collection reported little-to-no notice of the debt before it was referred to an agency, the advocacy groups say.
“It is profoundly disappointing that T-Mobile markets itself as a provider of equal access, but its misleading claims and aggressive debt collection likely have a disparate impact on communities of color and low income consumers,” Rashad Robinson, Executive Director of Color of Change said. “We believe an investigation is necessary, and will hopefully force much needed change at the company.”
T-Mobile US CEO fired back on Twitter to address the accusations, saying “We stand by our ads! Contrary to the click-bait headline, we haven’t been accused of false advertising by any regulatory body.”
In addition to the filing, Change to Win released a report called Unmasking the Un-Carrier, which they say substantiate their claims.
