In a complaint filed on Tuesday, 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 customers.
According to a news release, 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 complaint, T-Mobile in some cases continued to bill customers for 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 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 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.
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.
Read more: FTC.gov