Feds Charge T-Mobile With Scamming Customers Out of Hundreds of Millions of Dollars

Customers were billed for flirting tips, horoscope information, and other information they didn’t want.

A man talks on a mobile phone at the T-Mobile stand at the CeBIT technology fair March 15, 2007 in Hanover, Germany. CeBIT, the world's largest tech fair, will run from March 15-21. (Photo by Sean Gallup/Getty Images)
National Journal
Brendan Sasso
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Brendan Sasso
July 1, 2014, 10:34 a.m.

T-Mo­bile made hun­dreds of mil­lions of dol­lars by pla­cing un­wanted charges on cus­tom­ers’ monthly phone bills, ac­cord­ing to fed­er­al charges filed Tues­day.

The phone com­pany billed cus­tom­ers for flirt­ing tips, horo­scope in­form­a­tion, celebrity gos­sip, and oth­er ser­vices that they nev­er asked for, the Fed­er­al Trade Com­mis­sion says.

T-Mo­bile placed the charges on be­half of third-party scam­mers, but took a cut of 35-40 per­cent of the charges, ac­cord­ing to the law­suit. The ser­vices of­ten cost $9.99 per month.

In the com­plaint, the FTC claims T-Mo­bile con­tin­ued to bill many cus­tom­ers even after be­com­ing aware the ser­vices were scams.

“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,” FTC Chair­wo­man Edith Ramirez said in a state­ment.

The FTC will ask the court to force T-Mo­bile to provide re­funds for the hun­dreds of mil­lions of dol­lars in bogus charges, but the agency lacks the au­thor­ity to im­pose ad­di­tion­al fines. The Fed­er­al Com­mu­nic­a­tions Com­mis­sion, which has fin­ing power, has launched its own in­vest­ig­a­tion in­to T-Mo­bile’s prac­tices.

Jes­sica Rich, the dir­ect­or of the FTC’s Con­sumer Pro­tec­tion Bur­eau, said the agency ne­go­ti­ated with T-Mo­bile be­fore fil­ing the law­suit but was un­able to reach a set­tle­ment.

“We will be pro­ceed­ing in court,” she said. “We hope our law­suit sends a strong mes­sage to oth­er mo­bile phone com­pan­ies.”

In a state­ment, T-Mo­bile CEO John Legere said the charges are “un­foun­ded and without mer­it.”

He said the com­pany stopped billing for “premi­um” text ser­vices last year and already launched a pro­gram to provide re­funds. He said the third-party com­pan­ies “should be held ac­count­able” for scams, but that T-Mo­bile already has pro­ced­ures in place to com­bat un­wanted charges.

“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,” Legere said, call­ing the leg­al ac­tion “sen­sa­tion­al­ized.”

T-Mo­bile, the smal­lest of the four na­tion­al car­ri­ers, has earned a repu­ta­tion for ag­gress­ive mar­ket­ing tac­tics to take on the in­dustry’s lar­ger play­ers.

The FTC has brought nu­mer­ous cases in re­cent years over “cram­ming” — the prac­tice of pla­cing un­wanted charges on phone bills. But pre­vi­ous cases tar­geted the third-party scam­mers and not the phone com­pany that placed the charges on bills.

Ac­cord­ing to the FTC, the bogus charges were of­ten dif­fi­cult to find, iden­ti­fied only as “Use Charges” or “Premi­um Ser­vices” on on­line bills. T-Mo­bile’s pre­paid cus­tom­ers had the charges de­duc­ted from their avail­able monthly minutes without any no­ti­fic­a­tion, the FTC said.

Con­sumers can un­wit­tingly sign up for the scams by en­ter­ing their in­form­a­tion in­to on­line ads. Some of the cram­ming com­pan­ies buy batches of phone num­bers and charge cus­tom­ers who didn’t take any ac­tion to buy an ex­tra ser­vice.

This art­icle was up­dated with a com­ment from T-Mo­bile at 4:29 p.m.

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