T-Mobile has agreed to refund customers for unwanted third-party charges that appeared on phone bills, the Federal Trade Commission announced on Friday.
T-Mobile will pay at least $US90 million to settle the FTC lawsuit filed earlier this year, according to the FTC’s official statement.
In addition to refunding consumers, which would settle the suit brought by the FTC if the court approves it, T-Mobile will also have to pay $US18 million in fines and penalties to attorneys in all 50 states and the District of Columbia as well as $US4.5 million to the Federal Communication Commission.
Earlier this year, the FTC accused T-Mobile of “cramming,” a practice in which carriers place hidden charges on phone bills for premium third-party services, often without the user’s knowledge. These premium texting fees are often for services that sent users messages about their horoscopes, celebrity gossip, and other similar information.
These charges usually tack on about $US9.99 to your phone bill, and most users don’t catch on because the charges are relatively small compared with the overall bill and are not clearly marked. As the FTC’s statement from July explains, T-Mobile made it difficult for consumers to see where the charges are coming from. For example, the charges would be buried deep inside a user’s phone bill and could be disguised with a label like “8888906150BrnStorm23918.”
T-Mobile is believed to have made “hundreds of millions of dollars” from this practice, and reportedly kept between 35 to 40% of every charge placed, according to the FTC.
As part of the new agreement, T-Mobile will have to alert any and all consumers whose phone bills have been affected by cramming and issue a full refund. That alone will cost T-Mobile at least $US90 million, the FTC says.
Cramming isn’t a new practice, and it’s not exclusive to T-Mobile. Just two days ago, The FCC announced that the Consumer Financial Protection Bureau filed a federal lawsuit against Sprint alleging that it billed customers for unauthorised third party charges, as CNET reported.
Business Insider has reached out to T-Mobile for comment, and will update this story accordingly.
Here’s the full statement from the FTC:
T-Mobile has agreed to fully refund its customers for unwanted third-party charges it placed on their phone bills, a practice known as mobile cramming, paying at least $US90 million to settle a Federal Trade Commission lawsuit filed earlier this year.
In addition to the full refunds T-Mobile is providing, which will resolve the FTC’s lawsuit if approved by the court, T-Mobile is paying $US18 million in fines and penalties to the attorneys general of all 50 states and the District of Columbia and $US4.5 million to the Federal Communications Commission.
“Mobile cramming is an issue that has affected millions of American consumers, and I’m pleased that this settlement will put money back in the hands of affected T-Mobile customers,” said FTC Chairwoman Edith Ramirez. “Consumers should be able to trust that their mobile phone bills reflect the charges they authorised and nothing more.”
Under the terms of the settlement, T-Mobile will be required to offer full refunds to all affected consumers. The amount of money the company pays must reach at least $US90 million in redress or other payments. Should the company fail to do so, the balance must be remitted to the FTC for additional consumer redress, consumer education, or other uses. The settlement requires T-Mobile to contact all of its crammed customers — current and former — to inform them of the refund program and claims process, and to do so in a clear and conspicuous way.
The FTC filed suit against T-Mobile in July, alleging that the company placed millions of dollars in unwanted third-party charges on its customers’ mobile phone bills, receiving 35 to 40 per cent of every charge they placed. The charges were for services like horoscopes, love tips and celebrity gossip, for which T-Mobile typically billed consumers $US9.99 per month.
The FTC’s complaint alleges that in some cases, T-Mobile was charging consumers for services that had refund rates of up to 40 per cent 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 authorised by its customers.
According to the FTC’s July complaint, T-Mobile’s phone bills made it nearly impossible for consumers to find and understand third-party subscription charges. The FTC’s complaint against T-Mobile noted that in many instances information about the third-party charges crammed on to customers’ bills was buried deep in phone bills that totaled more than 50 pages in length.
In addition to requiring T-Mobile to provide consumers with full refunds, the settlement requires the company to get consumers’ express informed consent before placing third-party charges on their bills. The company also must ensure that consumers are notified of any third-party charges on their bills and provide them with information about the option to block third-party charges.
The FTC has brought numerous cases related to mobile cramming in recent months, taking action against mobile carriers and the third parties who place unauthorised charges.
The Commission vote approving the proposed stipulated order was 5-0. It is subject to court approval. The FTC filed the proposed stipulated order in the U.S. District Court for the Western District of Washington.
NOTE: Stipulated orders have the force of law when approved and signed by the District Court judge.
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