Did T-Mobile illegally make money off of its customers by billing them for third-party services they never signed up for?
That's what the Federal Trade Commission is alleging in a complaint filed Tuesday. According to the FTC, the wireless carrier got kickbacks when other companies offering "flirting tips, horoscope information or celebrity gossip" tried to bill customers for spammy content they didn't want or didn't ask for.
The charges often appeared on consumers' bills but were either buried so deeply that people couldn't find them, or they weren't itemized — so consumers had no idea that the bogus charges were being included in their "premium" text messaging or other fees, according to the FTC. The typical charge is a recurring $9.99 per month, the government said.
"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,” said FTC Chairwoman Edith Ramirez in a statement. “The FTC’s goal is to ensure that T-Mobile repays all its customers for these crammed charges.”
T-Mobile allegedly knew about the practice, known as "cramming." According to the FTC's complaint, many T-Mobile customers tried to cancel their "subscriptions" to the third-party services, with mixed success. The high rate of such requests should have tipped T-Mobile off to the fraudulent activity, the FTC said.
In a statement posted to the company's Web site, T-Mobile chief executive John Legere called the FTC's complaint a "sensationalized legal action" that was "unfounded and without merit."
"T-Mobile stopped billing for these Premium SMS services last year and launched a proactive program to provide full refunds for any customer that feels that they were charged for something they did not want," Legere said.
Within hours of the complaint, the Federal Communications Commission quickly vowed to use its own, independent enforcement authority to investigate T-Mobile's billing practices. The commission has punished companies nine times over cramming, according to the agency, leading to proposed fines coming to as much as $33 million, all told.
T-Mobile isn't the only company to have bumped up against cramming. In 2012, Verizon settled a class-action lawsuit concerning cramming, agreeing to refund to consumers all of the money they paid to Verizon as a result of bogus third-party charges. Some refunds added up to thousands of dollars in returned charges.
It's remarkably easy to wind up as a cramming victim. A study by the Federal Communications Commission has found that only 1 in 20 people who've been affected by the abuse ever realize anything's amiss. Twenty million people get crammed on an annual basis. Your phone number can become a target for scammers when you do something as simple as entering it into an untrustworthy Web form. One crammer that the FTC has named before is Wise Media, which allegedly picked phone numbers at random and tried to bill them for unwanted services.
It's an issue that's caught the eye of Congress, too. In March, Sen. Jay Rockefeller (D-W. Va.) vowed to crack down on wireless cramming, sending letters to the heads of AT&T, Verizon, Sprint and T-Mobile warning that he didn't think the companies had done enough to fight the practice.
"I am deeply disturbed by the FTC's allegations that T-Mobile allowed millions of dollars in unauthorized charges to be crammed on consumer wireless bills," said Rockefeller in a statement. "The FTC's allegations only heighten my concern about the industry's repeated assertions that voluntary oversight effectively protects consumers from cramming."
The FTC's complaint charges that as much as 40 percent of the total amount crammed onto consumers' wireless bills were diverted as revenue to T-Mobile.