In a complaint filed on Tuesday, the Federal Trade Commission (FTC) is charging mobile phone service provider T-Mobile with making hundreds of millions of dollars by placing charges on mobile phone bills for purported ‘premium’ SMS subscriptions. In many cases, these charges were bogus, and were never authorized by T-Mobile customers, says the FTC.
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.
Edith Ramirez (Chairwoman, FTC): 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.
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. 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 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. 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, according to the FTC. The complaint also alleges that T-Mobile in many cases failed to provide consumers with full refunds.
[Image courtesy: T-Mobile]