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FTC Says T-Mobile Made Hundreds of Millions From Bogus SMS Charges
An anonymous reader writes "Today the FTC filed a complaint (PDF) against T-Mobile USA, alleging the carrier made hundreds of millions of dollars from bogus charges placed on customers' bills for unauthorized SMS services. "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." FTC chairwoman Edith Ramirez 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. 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." According to the complaint, T-Mobile also made it hard for customers to figure out they were being billed for these services, and failed to provide refunds when customers complained."
Here's T-Mobile's response.
For those not clicking links, this is what T-Mobile had to say about this:
We have seen the complaint filed today by the FTC and find it to be 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. T-Mobile is fighting harder than any of the carriers to change the way the wireless industry operates and we are disappointed that the FTC has chosen to file this action against the most pro-consumer company in the industry rather than the real bad actors.
As the Un-carrier, we believe that customers should only pay for what they want and what they sign up for. We exited this business late last year, and announced an aggressive program to take care of customers and we are disappointed that the FTC has instead chosen to file this sensationalized legal action. We are the first to take action for the consumer and I am calling for the entire industry to do the same.
This is about doing what is right for consumers and we put in place procedures to protect our customers from unauthorized charges. Unfortunately, not all of these third party providers acted responsibly—an issue the entire industry faced. We believe those providers should be held accountable, and the FTC’s lawsuit seeking to hold T-Mobile responsible for their acts is not only factually and legally unfounded, but also misdirected.
-- John Legere, CEO of T-Mobile USA
I'm pretty sure that "T-Mobile USA, Inc." didn't actually do much of anything by itself, being a legal and accounting entity and all.
Any word on who actually directed, authorized, permitted, etc. this little plan, and why they aren't facing a raft of fraud charges?
Maybe its got something to do with the fact they offer and offered a variety of pre-paid plans that kept such issues to a minimum for me, but I remember my parents having tons of trouble with Verizon's billing practices. Every month they would be in quibbling over the charges until finally they had them disable SMS altogether. Never have I had an issue with T-Mobile.
This similar to the case of Google profiting from illegal ads. Personally I think the complaint should be sent to questionable subscription service rather than shoot the messenger.
When the 'messenger' is the one who hides the charge and collects the proceeds of the fraud(taking a cut), you bloody well should shoot him. Then shoot whoever he was working with, of course; but no need to choose.
FTC chairwoman Edith Ramirez 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. 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."
T-Mobile replied "It's wrong for the FCC to call us fraudulent, twice."
When the foot seeks the place of the head, the line is crossed. Know your place. Keep your place. Be a shoe.
T-Mobile did this to me a few years ago and never reversed the charges (claiming I had to go to the slamming company for a refund, which I did but unsurprisingly I never got the promised refund). They claimed I must have confirmed it via SMS but I pointed out my account has SMS disabled so there was no way for me to receive nor confirm I wanted it. They didn't really care. Given that I find the rebuttal to be disingenuous.
These are outrageous, but even at 20 cents a text, it's gouging IMO.
I was informed more than once that the companies have to accept third party billing charges. IMHO, what they don't have to do is hide the charges on the back of page four of the bill.
Read your monthly charge summaries carefully. If you catch a sham billing they will quickly remove it, but they will usually only go back a month or two. It's remarkably easy to miss a bogus four or five dollar monthly charge.
Happiness in intelligent people is the rarest thing I know.
Ernest Hemingway
If I look into the future I see a press release about a year from now:
"In a clear victory for consumers, the FTC has levied a fine of $20 million against T-Mobile in response to fraudulent SMS charges. The largest fine (related to fraudulent SMS charges on a tuesday, during a leap year) ever."
then another year out
"T-modile announced that a former FTC director will now work as CEO of Regulatory affairs. T-Mobile released a statement saying that they are pleased to be working with someone with so many years working in government. The FTC director said in a statement "I really like me new boat!"
The FTC is infamous for bring suit even years after the transgressions occurred.
Typical. Not much to see here.
Indeed, from the Complaint:
"Until at least December 2013, T-Mobile has also charged consumers for other services..."
"Until at least December 2013, in addition to charging for phone services offered
by Defendant, Defendant has charged many consumers for other services offered by third-party
merchants. These purported services have included monthly subscriptions for content such as
ringtones, wallpaper, and text messages providing horoscopes, flirting tips, celebrity gossip, and
other similar information (“Third-Party Subscriptions”). Defendant typically has charged
consumers $9.99 per month for such Third-Party Subscriptions. "
No doubt.
"9. In numerous instances, Defendant has charged consumers for Third-Party
Subscriptions that the consumers did not order or authorize, a practice known as cramming.
Defendant has continued to charge consumers for Third-Party Subscriptions even after large
numbers of consumers complained about unauthorized charges. Refund rates for the
subscriptions were high – in some cases as high as 40%. Further, Defendant has continued to
charge consumers for Third-Party Subscriptions even after industry auditor alerts, law
enforcement and other legal actions, and news articles indicated that the third-party merchants
were not obtaining valid authorization from consumers for the charges. "
FTC boilerplate for these sorts of complaints. Every carrier has done this, some repeatedly, over the past few decades.
"11. In television and other advertisements, and during its sales process, Defendant
markets its telephone and data services to consumers. Defendant’s sales representatives often
discuss these services only, and not purported third-party services, with consumers. Defendant’s
contracts make clear and prominent representations about the services it provides; information
about third-party services is buried in lengthy terms and conditions of its service contract.
12. Defendant has not obtained authorization from consumers before charging them
for Third-Party Subscriptions. Instead, the third-party merchants or billing intermediaries
purportedly have obtained authorization. In many cases, however, these third parties have failed
to obtain authorization from consumers."
And indeed, same old boilerplate. Especially the phrase "buried in lengthy terms and conditions of its service contract"
If the FTC would similarly file complaints against any number of corporations that do just this, they would be very very busy indeed.
This is PR for the FTC. You go, boyz!
deleting the extra space after periods so i can stay relevant, yeah.
It's funny to see T-Mobile back-peddling on this issue however anybody who could have had the premium services dropped could have done so at any time. For somebody to not review their bill and see that $10/mo was getting charged for this is a bit incredulous. Sprint, hell all the Cell providers have this kind of shit. Having gone through it with teenagers, I can tell you I had to scrutinize the bills monthly. T-Mobile's problem is that their billing and customer service practices make it a pain in the ass to get these things turned off. So there is merit in this suit moving forward but IMO there is no premium SMS service. Shit jokes, daily bikini girl pics. It's another way to bilk you out of your money like 900 numbers. and that's something the FTC should be going after as well.
I'm also wondering about the timing of this with the pending Sprint acquisition. It'll definitely put that on hold, which will force T-Mobile to pay some hefty fine (tax) that you and I will have to pay to cover the costs of giving the government more money. It's funny how that works out: company gets fined and then the same company passes those costs onto consumers.
Harrison's Postulate - "For every action there is an equal and opposite criticism"
I had the same experience with Vodafone UK. Eventually I got a refund, but only after I asked "is this call being recorded?" after demonstrating to the customer service rep that they had no evidence whatsoever of 1) me subscribing to the premium SMS spamming service or 2) that the T&Cs for premium SMS services were being complied with by the scammer. They also informed me at the end of the call about the STOP ALL message, which at that time (about 10 years ago) was not public knowledge, and which they could have told me at the start of the call instead of telling me to contact the company I'd subscribed from - and no they can't tell me who owns that number due to privacy restrictions.
In China, I buy a SIM, charge it with a card from a little shop or street vendor - or via electronic bill/payment machine at 7-11 or wherever, and use it til it runs out. I'm on a plan, but can pay for my plan with a charged account in this way. The plan costs I think $15usd/month and I never run over my limits - has a few hundred megs of data, a couple hundred minutes of talk, and I never pay anything for any incoming SMSs.... I can also pay for stuff off my charged phone account by entering my phone # into whatever service, getting a SMS with a code in it, and using that code in the service I'm trying to pay for's interface. It's not magic, but when looking at the fucked up US mobile system, and when I go back to Canada and have to arrange service for whatever length of time and it's always headaches, it sure does seem like it... (20mbit fibre is also a whopping $20/mo)
Duh, you didn't read the story, so of course you don't believe they hid anything. You probably don't even know what they're accused of hiding, and maybe not even that they are accused of hiding anything.
The filing linked not only accuses them of hiding the charges, they actually lie about the nature of the charges and instead of listing them as 3rd party charges, they hide them under "Use charges" with no breakout for 3rd party services on the first screen... or even on the click-through screen! You have to find the second hidden click-through, with still nothing listing 3rd party charges.
They're also accused of actually collecting a higher percentage cut... of the subscription services with the highest refund rates! So they clearly detected that those were scams, and instead of dropping the services, they demanded a larger cut. That is a substantial allegation, and it is very hard to come up with an innocent explanation for that difference in their own rates.
They're also accused of burying even their basic permission to charge for 3rd party services in the fine print. That is fine for the details of an agreement, but when a substantial part of the basic relationship is buried there, those provisions are probably not valid. Being bound to whatever the details said is very different than having not been clearly informed of the basic nature of the contract. And the contract is not a CC contract, it is a contract for specific telecommunications services.