T-Mobile CEO John Legere

FTC claims T-Mobile charged customers millions for bogus SMS subscription fees [Updated]

Update: T-Mobile CEO John Legere has posted a public response to these claims, saying they are "unfounded and without merit." He goes on to talk about T-Mobile's proactive response to these issues as compared to the competition. You can find the full statement at the T-Mobile Newsroom

Original story: The Federal Trade Commission says that T-Mobile has placed "hundreds of millions" of dollars in bogus charges into customer bills. In a press release issued today, the government office alleges that T-Mobile included premium SMS fees that it knew were fraudulent because of the high cancel-rates from subscribers. This is a practice the FTC calls "cramming."

[When] a phone company places charges on a consumer's bill for services offered by another company, often receiving a substantial percentage of the amount charged. When the charges are placed on the bill without the consumer's authorization, it is known as "cramming."

The FTC further alleges that because of the complexity of T-Mobile customer bills (which may be over 50 pages long), these charges were hidden and customers weren't able to easily sort out the various "Premium Service" charges. According to the complaint, the information would be listed there in an abbreviated form that did not explain that the charge was for a recurring third-party subscription supposedly authorized by the consumer.

This comes just weeks after T-Mobile announced that they were stepping up their fight against unauthorized billing and would be proactively notifying customers about charges of this nature. Certainly, these two are related.

The full press release follows.

FTC Alleges T-Mobile Crammed Bogus Charges onto Customers' Phone Bills

T-Mobile Was Aware For Years that Charges Were Not Authorized by its Customers

WASHINGTON, July 1, 2014 /PRNewswire-USNewswire/ -- In a complaint filed today, the Federal Trade Commission is charging mobile phone service provider T-Mobile USA, Inc., with making hundreds of millions of dollars by placing charges on mobile phone bills for purported "premium" SMS subscriptions that, in many cases, were bogus charges that were never authorized by its customers.

The FTC alleges that T-Mobile received anywhere from 35 to 40 percent of the total amount charged to consumers for subscriptions for content such as flirting tips, horoscope information or celebrity gossip that typically cost $9.99 per month. According to the FTC's complaint, T-Mobile in some cases continued to bill its customers for these services offered by scammers years after becoming aware of signs that the charges were fraudulent.

"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. "The FTC's goal is to ensure that T-Mobile repays all its customers for these crammed charges."

In a process known as "third-party billing," a phone company places charges on a consumer's bill for services offered by another company, often receiving a substantial percentage of the amount charged. When the charges are placed on the bill without the consumer's authorization, it is known as "cramming."

The FTC's complaint alleges that in some cases, T-Mobile was charging consumers for services that had refund rates of up to 40 percent in a single month. The FTC has alleged that because such a large number of people were seeking refunds, it was an obvious sign to T-Mobile that the charges were never authorized by its customers. As the complaint notes, the refund rate likely significantly understates the percentage of consumers who were crammed. The complaint also states that internal company documents show that T-Mobile had received a high number of consumer complaints at least as early as 2012.

The FTC has made significant efforts to end mobile cramming. In the last year, in addition to holding a public workshop on mobile cramming, the Commission has filed several lawsuits against alleged mobile cramming operations Jesta Digital, Wise Media, and Tatto Inc.According to today's complaint, T-Mobile billed its customers for the services of these FTC defendants as well as an operation sued by the Texas Attorney General.

The complaint against T-Mobile alleges that the company's billing practices made it difficult for consumers to detect that they were being charged, much less by whom. When consumers viewed a summary of their T-Mobile bill online, according to the complaint, 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.

The complaint also alleges that T-Mobile's full phone bills, which can be longer than 50 pages, made it nearly impossible for consumers to find and understand third-party subscription charges. After looking past a "Summary" section as well as an "Account Service Detail" section, both of which described "Usage Charges" but did not itemize those charges, a consumer might then reach the section labeled "Premium Services," where the crammed items would be listed.

According to the complaint, the information would be listed there in an abbreviated form, such as "8888906150BrnStorm23918," that did not explain that the charge was for a recurring third-party subscription supposedly authorized by the consumer. In addition, the complaint notes that consumers who use pre-paid calling plans do not receive monthly bills, and as a result the subscription fee was debited from their pre-paid account without their knowledge.

When consumers were able to determine they were being charged for services they hadn't ordered, the complaint alleges that T-Mobile 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.

The complaint also notes that in some cases, T-Mobile claimed that consumers had authorized the charges despite having no proof of consumers doing so.

The FTC's complaint seeks a court order to permanently prevent T-Mobile from engaging in mobile cramming and to obtain refunds for consumers and disgorgement of T-Mobile's ill-gotten gains.

The FTC thanks the Federal Communications Commission and its Enforcement Bureau for their invaluable assistance with and close cooperation and coordination in this matter.

The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Western District of Washington.

NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.

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Reader comments

FTC claims T-Mobile charged customers millions for bogus SMS subscription fees [Updated]

42 Comments

Been with T-mo for over 14 years and never seen such activity on my phone and can easily browse every incoming number or otherwise on SMS/data usage. This is also with the day they released the iPhone 5 on the LTE network.

Weird.

I jumped ship from the Death Star network as it was overburdened and got worse every following year. I had them unlock my 4S and carried it to T-Mobile which for a while, sucked badly since I live on the edge of the detailed coverage area where the best I could get was a GPRS connection. Shortly before the launch of the iPhone 5 on Tmo, not one but two new LTE towers went up. The speeds I get over the network are faster than most of my friends broadband connections.

Good things come to those who wait. Now inside my riverside studio, three to four "dots" in iOS 7 of pure LTE speeds that allowed me to watch HD streams on Netflix when Comcast was down for service.

That of which I only have Internet service from Comcast. The television service is too expensive for what you get so they got cut off. Netflix streaming made much more sense to me and I was surprised that using my tethering feature on my iPhone 5 had performed so well indoors. Even streaming a full 1080p movie to my MacBook Pro.

Trolls are fun to watch. Sorry I can't draw stick figures for you both. You most likely didn't even read the article FFS

GTFO.

What an amazing counterpoint.

wtf are you attacking this guy for? Perhaps he just wanted to show that he's happy with what he has. I'm stuck with Verizon with a Galaxy S3. Waiting for iPhone 6 hoping that tmoble would be faster

I cannot describe how much Verizon has crammed me over the years. They have so many made up fees it's not even funny.

This is another reason why I pay prepaid. I pay the same price before each month, so I am not shocked when the bill comes.

Sent from the iMore App

Check out this from the complaint: "In addition, the complaint notes that consumers who use pre-paid calling plans do not receive monthly bills, and as a result the subscription fee was debited from their pre-paid account without their knowledge."

To clear things up and put things in perspective, I once had used this feature which I cannot find anywhere on my carrier data access page for years now. When I carried a feature phone (Samsung SGH T-809 for age reference) I did have a daily push text to my phone for the weather forecast expected for the day.

Way back in 2006 and into 2007 when the original iPhone launched. I bought into the hype and my wallet cried for a week or two after buying two brand new first generation iPhones. On top of that was the mandatory contract agreement with AT&T. With my calling plan, unlimited texts and EDGE data for iPhone. That was one killer phone bill.

Going back to my T-Mobile line of service, I kept it for all these years and easily disabled the push text message service and remove it from my service plan which I rolled back. Since I was going to using that iPhone plenty. Never another crammed text or otherwise. Even when upgrading to a BlackBerry 9700 for my T-Mobile line. It just simply worked as one would expect it to.

The only way I think this could happen is that when T-Mobile had a majority of feature phones and the HTC G1 and other Android phones that had such apps built-in, the customer web portal had been changed around several times for newer phones and those earlier smartphones and Sidekick phones even went to the wayside including my BlackBerry that I had upgraded to a MyTouch 4G and several others after that. Still no crammed texts.

The web portal which had changed and phased out that option for most everyone. I can say though that the premium text provider was a third party and "partner" to offer custom data to early phones when T9 text was mainstream along with clamshell phones that you find in thrift stores or for sale as "collectors items" on Craigslist.

All that being said, I don't know anyone else personally that ever spoke of this issue before. I know a lot of people who use T-Mobile and others who pay the Verizon premium price for a dated network technology and others who choose to stay on AT&T.

I would say if someone's still getting these text messages most likely are still rocking that Moto Razr or other old phone that has never gotten a new SIM module and have no desire to upgrade and due to the latest customer account portal, don't have the link or option to stop the madness.

If you search far enough back. All carriers put improper charges on bills. Sometimes for service a customer did not have. I hear all the time. Use this carrier. You get free calls, free data, free text, free long distance, and so on. Common sense tells you if all this is free, they will be out of business quickly. Some were even charging data service when you had no data. They know if the bill is the same every month, give or take a few bucks, we will not question it. It really pays to look hard at the bill each month, and look for hidden fees.

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Was adding some personal insight on how such things can happen as many older phones had an easy way to enable said features but didn't realize they couldn't disable that feature via the phone itself. Then again, you most likely didn't read the article completely.

Haters gonna hate, so do what you do best. Bitch and whine.

hard to go back that far, but thanks for the info on tmobile, I want to cancel Verizon, the bill is crazy!

FCC has their share of bogus fees. TMobile no different than the other carriers, once in your pocket always in your pocket.

The carriers are the cartels here in the states. They're all dirty and lookout for each other's interests. They all do this "cramming" and they aren't that truly against each other. They know what only is enthusiasts see. They're just a dumb pipe for our smartphones to get working.

Sounds like a competitor has a friend trying to hurt the T-Mobile train. Been with T-Mobile for over 10 yrs, never was billed a dime over what my bill should be, it was always the opposite, T-Mobile would always give me a break. This is a total inside scam and whoever started this lie should be reprimanded.

This should be an industry-wide investigation, not just T-Moble. ATT has done the same thing to me a few times and I finally got them to block all txt subscribtions lie that from my service.

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Waiting to ditch Verizon for some crazy ass bills and was hoping to switch to tmobile when a larger screen iphone 6 drops. Not sure now.