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.

Comments

T-Mobile's Reponse

[darkain]

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

Re:T-Mobile's Reponse

[St.Creed]

Given the FTC complaint, if the statements made there are true T-mobile's going to be paying a lot of money this year: The FTC claims they made it impossible for the customer to detect the fraud in the first place, ignored all warning signs from those that managed to detect it anyway, then did not provide full refunds in all cases but partial at best, none at worst - and told those customers to deal with the scammers themselves while failing to provide the contact details they had.

If these things can be proven (should be pretty easy, the accusations are highly specific), T-mobile is looking at a pretty hefty class action suit.

Re:T-Mobile's Reponse

[Karma Sucks]

I'm going to go ahead and surmise that other carriers are behind this attack. What else explains the FTC not going after AT&T and Verizon for equally bad and worse stuff? T-Mobile has explicitly halted this practice.

Re:T-Mobile's Reponse

[LordKronos]

I have to say, my experience with these bogus charges supports t-mobiles claims. About 3-4 years back, my wife somehow got signed up for some bogus service that was charging $10 per month. I didn't notice it until the 3rd bill. I called up t-mobile and they refunded the entire amount with no hassle. Furthermore, since my wife never uses any of those subscription services at all, they even offered to put a block on her account so she couldn't be re-subscribed.

That was years ago, and we haven't had any more problems. I had even forgotten all about it, but a few weeks ago I found out that block is still in place. We tried to sign up for a free text message subscription with Target so that we could get a $5 coupon they were offering. Tmobile automatically rejected our signup attempt, indicating that the service is blocked.

That said, I do have to nitpick one thing in t-mobile's statement:

In fact T-Mobile...launched a proactive program to provide full refunds for any customer that feels that they were charged for something they did not want

That sounds more reactive than proactive.

Re:T-Mobile's Reponse

[Intron]

Astroturf is on sale this week at Home Depot.

T-Mobiles been the best carrier in this regard....

[Anonymous Coward]

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.

it's wrong...

[alphatel]

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."

And Then Some

[rmdingler]

In my personal and professional experience, providing phones to field employees and teenagers, this sort of chicanery has occurred with AT&T, Sprint, and Verizon.

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.

Crystal ball...

[Charliemopps]

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!"

Already obsolete

[rickb928]

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!

T-Mobile and the customer liable here

[Virtucon]

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.