WASHINGTON
— T-Mobile, which sees itself as a new kind of carrier, now stands
accused of an old-fashioned practice — overbilling its customers.
The Federal Trade Commission on Tuesday brought a legal action accusing T-Mobile of
illegally earning
hundreds of millions of dollars by placing bogus charges on customers’
cellphone bills for premium texting services that the consumers never
ordered. Regulators said that T-Mobile had been allowing the third-party
charges, and taking a hefty cut of the revenue, since 2009.
The
case is one of the largest yet brought by regulators against a major
telecommunications company for unauthorized billing, known as
“cramming.” The practice has been relatively common for landlines, but
recently began to appear on mobile bills.
In
T-Mobile’s case, the F.T.C. said, fees for services like “flirting
tips, horoscope information or celebrity gossip,” typically were for
$9.99, of which 35 to 40 percent went to T-Mobile. In some cases,
customers were charged for “years after becoming aware of signs that the
charges were fraudulent,” it said.
Jessica
Rich, director of the agency’s Bureau of Consumer Protection, said in a
briefing that T-Mobile had “ignored telltale signs of fraud” in the
charges, harming many consumers.
John Legere, T-Mobile’s chief executive, said in a statement that the F.T.C.’s accusations were without merit.
Also
on Tuesday, the Federal Communications Commission said it was
investigating T-Mobile’s billing practices after receiving consumer
complaints. The commission and the F.T.C. are the two main regulators of
the telecommunications industry.
The inquiry and the accusations come at an awkward time for T-Mobile, which has been reported to be
in talks with Sprint for a merger
that would have to be approved by the F.C.C. T-Mobile has trumpeted
itself in its ad campaign as the “Un-carrier” eliminating the things
that frustrate customers, like hidden charges and confusing two-year
contracts. For its efforts, the company has won praise and millions of
customers.
Some
of the charges resulted in refunds being given to 40 percent of the
customers who asked for them, “an obvious sign to T-Mobile that the
charges were never authorized by its customers,” the F.T.C. said.
“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 Edith Ramirez, the F.T.C. chairwoman.
“The FTC’s goal is to ensure that T-Mobile repays all its customers for
these crammed charges.”
In
his statement, Mr. Legere said that last year the company stopped
allowing third-party companies to impose charges, and last month
proactively offered refunds to customers.
“We
are disappointed that the F.T.C. has chosen to file this action against
the most pro-consumer company in the industry rather than the real bad
actors,” Mr. Legere said. “The F.T.C.’s lawsuit seeking to hold T-Mobile
responsible for their acts is not only factually and legally unfounded,
but also misdirected.”
According
to the F.T.C. complaint, filed in federal court in Seattle, T-Mobile
told the agency that consumers had authorized the charges. But the
agency said the company had shown “no proof of consumers’ doing so.”
Commission officials said they had tried unsuccessfully to reach a
settlement with T-Mobile.
The
F.T.C. is seeking refunds for consumers, and to permanently prevent
T-Mobile from engaging in cramming. The commission lacks the power to
impose its own fines for charges of consumer fraud, but the F.C.C. has
that authority. In the last four years that agency has taken nine
enforcement actions against companies for cramming that have totaled
more than $33 million in proposed fines.
Consumers
would have had a hard time figuring out that they were being charged by
T-Mobile for the services, the F.T.C. said, because the company’s
online billing statements did not show that the charge was coming from a
third party or that it was a recurring payment. Its full-length bills,
which often run to dozens of pages, gave more information, but in what
was often unintelligible fashion, the agency said.
For
example, one type of unauthorized charges appeared on bills with the
service listed as “8888906150BmStorm23918,” the F.T.C. said. Consumers
who had prepaid phone plans do not receive a bill at all; therefore, the
amount was simply deducted from their accounts, according to the
agency.
T-Mobile
announced in November 2013 that it would no longer allow third parties
to bill its customers for premium texting services. When it offered
refunds last month to consumers, Mike Sievert, the company’s chief
marketing officer, said: “If customers were charged for services they
didn’t want, we’ll make it right. That’s being the Un-carrier.”
The
F.T.C.’s complaint says, however, that T-Mobile knew in early 2012 that
customers were complaining about the charges in increasing numbers and
that it had identified several third-party merchants as the subject of
those complaints. But, the F.T.C. said, T-Mobile did little to determine
whether the customers had authorized the charges.
T-Mobile
refused to give some consumers refunds when they asked for them, the
commission said, or told them it would block future charges and then
failed to do so.
