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
Add to Briefcase
See more stories about...
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 »
ANOTHER GOP MODERATE TO HER SIDE
John Warner to Endorse Clinton
8 hours ago
THE LATEST

"Democratic presidential nominee Hillary Clinton will score another high-powered Republican endorsement on Wednesday, according to a campaign aide: retired senator John Warner of Virginia, a popular GOP maverick with renowned military credentials."

Source:
AUTHORITY OF EPA IN QUESTION
Appeals Court Hears Clean Power Plant Case
8 hours ago
THE LATEST

The U.S. Court of Appeals for the District of Columbia Circuit on Tuesday "heard several hours of oral arguments" over the Environmental Protection Agency's Clean Power Plan rules. The 10-judge panel "focused much of their questioning on whether the EPA had overstepped its legal authority by seeking to broadly compel this shift away from coal, a move the EPA calls the Best System of Emission Reduction, or BSER. The states and companies suing the EPA argue the agency doesn’t have the authority to regulate anything outside of a power plant itself."

Source:
$28 MILLION THIS WEEK
Here Come the Ad Buys
9 hours ago
THE LATEST

"Spending by super PACs tied to Donald Trump friends such as Ben Carson and banker Andy Beal will help make this week the general election's most expensive yet. Republicans and Democrats will spend almost $28 million on radio and television this week, according to advertising records, as Trump substantially increases his advertising buy for the final stretch. He's spending $6.4 million in nine states, part of what aides have said will be a $100 million television campaign through Election Day."

Source:
GOP REFUSED VOTE ON FCC COMMISIONER
Reid Blocks Tech Bill Over “Broken Promise”
13 hours ago
THE DETAILS

Monday night's debate may have inspired some in Congress, as Senate Minority Leader has decided to take a stand of his own. Reid is declining to allow a vote on a "bipartisan bill that would bolster U.S. spectrum availability and the deployment of wireless broadband." Why? Because of a "broken promise" made a year ago by Republicans, who have refused to vote on confirmation for a Democratic commissioner on the Federal Communications Commission to a second term. Harry Reid then took it a step further, invoking another confirmation vote still outstanding, that of Supreme Court nominee Merrick Garland.

Source:
FLINT FUNDING STILL AT ISSUE
Spending Bill Fails to Clear 60-Vote Hurdle
15 hours ago
THE LATEST
×