T-Mobile USA will have to pay at least $90 million in refunds, fines and penalties to consumers and state and federal government agencies for “cramming” customer phone bills with unauthorized charges for years and then ignoring complaints and requests for refunds.
The settlement with T-Mobile, which was announced Dec. 19 by officials from the Federal Communications Commission, the Federal Trade Commission and by a representative of state governors across the United States, could conceivably rise to hundreds of millions of dollars in refunds, depending on how many affected customers submit claims to get their money back, officials said.
In a 16-page consent decree with the FCC and FTC, T-Mobile has agreed to pay at least $67.5 million in direct refunds to consumers who file claims for phone bill charges that they did not authorize, as well as $18 million in fines to the 50 states and the District of Columbia, as well as a $4.5 million fine to the U.S. government.
“This is a major settlement that will put tens of millions of dollars back into the pockets of consumers,” Jessica L. Rich, director of the FTC’s Bureau of Consumer Protection, said during a conference call with reporters on Dec. 19. “This case is about a core principle, that no business should bill a consumer for charges that they did not authorize, period.”
The agencies had alleged that T-Mobile included charges for third-party Premium Short Message Services (PSMS) on its customers’ telephone bills until late 2013 for services such as ringtones, wallpapers, astrology text messages, celebrity gossip, flirting tips and other services that customers did not order or authorize. The unauthorized monthly charges ranged from 99 cents to $14, but were typically $9.99 per service, according to the government’s complaint. The company then kept about 35 percent of the fees it collected from consumers, providing T-Mobile with a revenue stream it didn’t want to give up, according to the agencies.
Those charges were in many cases fought by consumers who called T-Mobile with complaints, but the company failed to resolve most complaints, even providing erroneous information to consumers who called to challenge the unauthorized charges, the agencies stated.
Now T-Mobile will have to set up clear, specific procedures to effectively prevent future bill cramming and will be able to bill customers for such charges in the future only after receiving positive confirmation from customers that they seek such services, the decree states. The company will also be required to fully instruct customers how they can completely opt-out of ever being billed for such services.
The fines against T-Mobile come two months after a similar case by the agencies against AT&T Mobility, when that phone carrier was fined $105 million in October for cramming the bills of its own customers, according to an earlier eWEEK report. In the AT&T case, the fine came after investigations by the FCC and the FTC found that AT&T had illegally crammed customer cell phone bills with extra, unauthorized charges and then refused to adequately remove the charges when users complained. That $105 million fine included $80 million for direct refunds to customers as well as $25 million in penalties to be paid to the FCC, FTC and attorneys general across the United States. It still stands as the largest fine in the history of the FCC so far, according to the agency.
FCC Fines T-Mobile at Least $90M for ‘Cramming’ Bills
Travis LeBlanc, chief of the FCC’s enforcement bureau, said during the conference call that both the T-Mobile and AT&T settlements, combined, show that the nation’s phone carriers are being put on notice that they can no longer rip consumers off by assessing unauthorized charges.
“We stand together as two federal agencies and as 50 states and the District of Columbia,” he said. Through the investigations by the agencies “we learned that T-Mobile profited handsomely from unauthorized Premium SMS [Short Message Service] charges,” said LeBlanc. “They allowed vendors to charge consumers month after month even after customer complaints. In short, we learned that T-Mobile was in bed with the crammers. And crammers are predators that are a threat to consumers everywhere.”
Rich and LeBlanc declined to comment when asked by eWEEK about any pending similar investigations against Sprint and Verizon Wireless, which have so far not been named in cramming complaints by the government.
The FCC’s partner agency, the Consumer Financial Protection Bureau (CFPB), filed a lawsuit on Dec. 17 against Sprint over similar alleged cramming actions against its customers, according to an earlier eWEEK report. “The bureau’s complaint alleges that Sprint operated a billing system that allowed third parties to ‘cram’ unauthorized charges on customers’ mobile-phone accounts and ignored complaints about the charges,” the agency said in a statement. The CFPB said it is seeking refunds for affected consumers and penalties to deter such unauthorized third-party charges in the future.
A report published by The National Journal on Dec. 15 said that a $105 million bill cramming fine against Sprint will soon be announced by the FCC. LeBlanc of the FCC would not comment about that report.
Tom Wheeler, the chairman of the FCC, said in a statement that the settlement with T-Mobile “is a win for consumers who have been victimized by cramming. It means compensation for T-Mobile customers who were fraudulently billed for third-party services that they did not want or authorize. And it goes one step further. Today’s action will also help protect all of T-Mobile’s customers from bogus third-party charges in the future.”
The pressure will continue to be placed by the agency on phone carriers that continue to push the insidious practices on their customers, said Wheeler. “The FCC remains committed to protecting consumers from cramming as well as any unjust and unreasonable business practices committed by the nation’s carriers.”