U.S. FTC alleges T-Mobile USA stole hundreds of millions of dollars from customers via bogus charges

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, in a statement. “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.

Source: U.S. Federal Trade Commission

[Thanks to MacDailyNews Readers “Sarah” and “Lynn Weiler” for the heads up.]


    1. This article is about a problem that likely dates back a number of years and may not even be current at all, especially since John Legere was appointed CEO in September 2012 and began giving T-Mobile the massive overhaul we’ve been witnessing for the last year. Cases like these take years just to research sometimes. And then there’s the lengthy court process.

      This article probably should have pointed out that this matter does not necessarily correspond to the current iteration of T-Mobile.

    2. This is obviously another case of Washington corruption. Not unlike Apple’s electronic books case, where Amazon was lobbyist, this one is result of past and future bribes by AT&T and Verizon. Remember that Washington is a revolving door between executive branch offices and law/consultancy/lobby firms.

      1. What’s ‘obvious’ here? The data is what’s obvious. Allegations based on proven fact don’t equate to corruption.

        Meanwhile, oh yes. #MyStupidGovernment is supremely corrupted. I just don’t see that corruption coming into play in this situation. But I’m always ready to learn more…

    3. This is complete BS. T-Mobile seems to have stepped on AT&T’s or Verizon’s toes once too often lately. The current administration is known to use federal agencies to pressure those who offend their political supporters, just like the DOJ going after Apple for interfering with Amazon’s ebook sales monopoly.

      T-Mobile CEO John Legere called the FTC’s complaint “unfounded and without merit. In fact, T-Mobile stopped billing for these Premium SMS services last year and launched a proactive program to provide full refunds for any customer that feels that they were charged for something they did not want.”

      And there’s a term for this kind of scamming precisely because it was an industry wide practice for years. AT&T, Verizon, and others have routinely done the same thing. T-Mobile is being singled out, just as Apple was.

  1. AT&T Too… Let’s not forget, all the phone companies play this game… Oh yeah, no more than two months refund. Their statement, it’s your phone bill you should be paying attention.

  2. Just to get this in ahead of the Obama-bashing: note that the federal lawsuit was filed after a suit by the Texas Attorney General. Greg Abbott is the Republican nominee and prohibitive favorite for Governor in Ted Cruz’ home state (if not home province). This is a bipartisan effort, like the Apple eBook suit, though (I hope) better policy.

  3. Yet another example of the unfettered free market ALWAYS doing the right thing. There is an easy solution, a regulation, if you will. “You can’t include any charges on your bill to a citizen for any services not explicitly in the contract. If you do, the refund will be triple the amount you charged”. But that would probably only come from a Goverment “for the people”.

  4. Great: Yet another company that methodically screws its customers. Die T-Mobile, die.

    What makes me sick is that scum companies like this are considered ‘capitalist’. No, they’re parasites. Regulating deceitful scum like T-Mobile out of existence is fine with me.

  5. Have had prepaid TM for a longtime. In the past few years the minutes used have seem excessive even given that they and ATT count from when the phone rings (“you’re using our network”). No easy way to check. Switched to ATT prepaid and consumption is much less and I can see how long each call is get a text message as to billing.

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