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
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.

What We're Following See More »
STAFF PICKS
What the Current Crop of Candidates Could Learn from JFK
1 days ago
WHY WE CARE

Much has been made of David Brooks’s recent New York Times column, in which confesses to missing already the civility and humanity of Barack Obama, compared to who might take his place. In NewYorker.com, Jeffrey Frank reminds us how critical such attributes are to foreign policy. “It’s hard to imagine Kennedy so casually referring to the leader of Russia as a gangster or a thug. For that matter, it’s hard to imagine any president comparing the Russian leader to Hitler [as] Hillary Clinton did at a private fund-raiser. … Kennedy, who always worried that miscalculation could lead to war, paid close attention to the language of diplomacy.”

Source:
STAFF PICKS
Maher Weighs in on Bernie, Trump and Palin
1 days ago
WHY WE CARE

“We haven’t seen a true leftist since FDR, so many millions are coming out of the woodwork to vote for Bernie Sanders; he is the Occupy movement now come to life in the political arena.” So says Bill Maher in his Hollywood Reporter cover story (more a stream-of-consciousness riff than an essay, actually). Conservative states may never vote for a socialist in the general election, but “this stuff has never been on the table, and these voters have never been activated.” Maher saves most of his bile for Donald Trump and Sarah Palin, writing that by nominating Palin as vice president “John McCain is the one who opened the Book of the Dead and let the monsters out.” And Trump is picking up where Palin left off.

Source:
×