The United States Federal Trade Commission has filed a complaint against T-Mobile USA, alleging that the mobile phone service provider made hundreds of millions of dollars through charges placed on mobile phone bills for supposedly premium SMS subscriptions.
In many cases, the charges were bogus and never given authorization by T-Mobile's customers.
The FTC also complained that T-Mobile went on billing its customers for the bogus subscriptions for years, even after knowing that such charges were fraudulent. Refund rates for the services involved reached up to 40 percent in a month, and with such a high percentage of consumers seeking refunds, that should have been a sign that the charges were fraudulent or unauthorized by the consumer.
The unfair practice is known as "cramming," when charges are placed on a consumer's bill without the consumer's prior consent and authorization. FTC is saying that T-Mobile is guilty of "cramming," obtaining a considerable sum of profit through the practice. T-Mobile carried out the scheme with "third-party billing," wherein the company adds charges on a consumer's bill for services that are offered by other companies, with T-Mobile receiving a significant percentage of the charged amount.
The percentage the FTC is saying that T-Mobile received from the bogus subscriptions reaches as much as between 35 and 40 percent with the subscriptions spanning a wide variety of content such as horoscopes and gossips. The typical cost for such subscriptions is $9.99 monthly.
"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, FTC Chairwoman. "The FTC's goal is to ensure that T-Mobile repays all its customers for these crammed charges."
The FTC has been making efforts to put a stop to mobile cramming, filing several lawsuits last year against purported mobile cramming companies Wise Media, Jesta Digital and Tatto Inc. FTC's complaint alleges that T-Mobile charged its consumers for the services of these companies.
In addition to the fraudulent charges, the FTC said that T-Mobile's mobile phone bills, which can go as long as 50 pages per phone number, makes it almost impossible for their customers to check if they are being forced to pay subscription charges. The crammed items are buried underneath several categories, and were not indicated as charges for a recurring third-party subscription service.
Prepaid plan subscribers, who are not sent monthly phone bills, are instead charged by automatically debiting the monthly subscription charge from their prepaid account without their consent.
The FTC is seeking a court order to stop T-Mobile's cramming practices permanently, along with refunds to the company's affected customers and the disgorgement of its ill-gotten wealth.