FTC accuses T-Mobile US of fraudulent billing tied to premium SMS services

The Federal Trade Commission has accused T-Mobile US of profiting from fraudulent premium SMS services charged to its customers. The claim states that the operator received up to 40% of such charges that typically cost up to $10 per month, and raked in “hundreds of millions of dollars” from the practice.
T-Mobile US claims the accusations are “unfounded and without merit.”
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 such the carrier had received a “high number of consumer complaints at least as early as 2012.”
“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,” said FTC Chairwoman Edith Ramirez, in a statement. “The FTC’s goal is to ensure that T-Mobile repays all its customers for these crammed charges.”
The complexity of wireless billing was also alleged to have helped T-Mobile US cover up the charges, with the FTC noting:
“When consumers viewed a summary of their T-Mobile bill online … it did not show consumers that they were being charged by a third party, or that the charge was part of a recurring subscription. The heading under which the charges would be listed, ‘Premium Services,’ could only be seen after clicking on a separate heading called ‘Use Charges.’ Even after clicking, though, consumers still could not see the individual charges.”
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.”
In addition, the FTC said that in some cases T-Mobile US claimed consumers had authorized the charges despite not having proof of such authorization.
The Federal Communications Commission said it was investigating the complaint, noting that T-Mobile US subscribers had filed similar complaints of unwanted charges “included billing for ringtones, wallpapers and text message subscriptions to services providing horoscopes, flirting tips and celebrity gossip.”
“Consumers should not be charged for services that they did not order,” said Travis LeBlanc, acting chief the FCC’s Enforcement Bureau, in a statement. “We will coordinate our investigation with the FTC, and use our independent enforcement authority to ensure a thorough, swift and just resolution of the numerous complaints against T-Mobile.”
T-Mobile US attempted to get out in front of this controversy, announcing last month 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.
The carrier noted that customers will be able to request refunds for any unauthorized charges for services provided by those third-parties. T-Mobile US explained that “despite protections and processes put in place by T-Mobile and the industry, not all premium SMS vendors acted responsibly.”
“If you’ve been charged for a third-party service you didn’t sign up for, it should be easy to get a refund,” said Mike Sievert, CMO for T-Mobile US. “If customers were charged for services they didn’t want, we’ll make it right.”
T-Mobile US announced last November that it would stop supporting such billing arrangements.
T-Mobile US CEO John Legere cited these efforts in noting that the carrier has aggressively moved to counter these issues and that it should not be solely held accountable for a practice that has been prevalent across the wireless space.
“This is about doing what is right for consumers and we put in place procedures to protect our customers from unauthorized charges,” Legere noted in a statement. “Unfortunately, not all of these third party providers acted responsibly – an issue the entire industry faced. We believe those providers should be held accountable, and the FTC’s lawsuit seeking to hold T-Mobile responsible for their acts is not only factually and legally unfounded, but also misdirected.”
The premium SMS services market has gained a reputation as being filled with fraudulent billing schemes, which wireless carriers have tried to combat.
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