In a lawsuit filed in federal court Tuesday, the agency said the self-proclaimed "uncarrier" fraudulently billed customers for premium text-message subscriptions—such as horoscope information or celebrity gossip—without their consent, dating back to at least 2009. The subscriptions typically cost $9.99 a month, with T-Mobile taking a cut of 35% to 40%, according to the FTC.
"The FTC's goal in filing this lawsuit is to ensure T-Mobile repays its customers for these crammed charges," Jessica Rich, FTC consumer protection director, said in a media call. The FTC filed its suit after it was unable to reach a settlement with T-Mobile.
Rich said T-Mobile "disregarded telltale signs of fraud" for years. In some cases, the premium subscription services saw refund rates of up to 40% in a single month, a sign of cramming. In comparison, the credit card industry sees an average chargeback, or disputed transaction, rate of 0.2%. The charges, she noted, were also "deceptively hidden" on consumers' wireless bills. The FTC alleged that T-Mobile refused to give full refunds to customers in many cases, offered partial refunds of two months to some, and instructed others to seek refunds from the third-party services without providing accurate contact information.
Brian Shull, a lawyer with the Bureau of Consumer Protection, said third-party vendors that sell SMS subscriptions are required to get consumers' authorization twice, known as a double opt-in process. However, the merchants "used either deceptive advertising that hides the fact the consumer is signing up for these charges," he said, "or, in many cases, they're buying phone numbers from random places and billing customers without consent."
In a blog post, T-Mobile CEO John Legere said the company stopping billing consumers for these premium services last year and set up a program to help them claim refunds. "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," he said. "As the Un-carrier, we believe that customers should only pay for what they want and what they sign up for."
[Image: Flickr user Mike Mozart]