FTC Accuses T-Mobile of ‘Cramming’
Posted at 2:54 p.m. on July 1, 2014
The Federal Trade Commission is taking legal action against T-Mobile, accusing the company of “cramming,” or charging customers for third-party services that they didn’t authorize. And the Federal Communications Commission is launching its own investigation.
From the claim filed by the FTC:
In numerous instances, Defendant has charged consumers for Third-Party Subscriptions that the consumer did not order or authorize, a practice known as cramming. Defendant has continued to charge consumers for Third-Party Subscriptions even after large numbers of consumers complained about unauthorized charges. Refund rates for the subscriptions were high – in some cases as high as 40%. Further, Defendant has continued to charge consumers for Third-Party Subscriptions even after industry audits or alerts, law enforcement and other legal actions, and news articles indicated that the third-party merchants were not obtaining valid authorization from consumers for the charges.
The agency is seeking an injunction to prevent further violations, consumer refunds and “disgorgement of ill-gotten monies.”
In a call with reporters, Jessica Rich, director of the agency’s Bureau of Consumer Protection, said that T-Mobile charged consumers for services offered by third parties, meaning it let other companies place charges onto T-Mobile phone bills, and that the FTC alleges that T-Mobile took a “hefty cut” of about 35 to 40 percent of these charges.
T-Mobile took in hundreds of millions of dollars from customers and much of that was unauthorized, she said.
The FTC alleges that T-Mobile knew about fraudulent charges and failed to stop them or take action and they continued as a result, she said.
The Federal Communications Commission is also launching its own investigation.
“We will coordinate our investigation with the FTC, and use our independent enforcement authority to ensure a thorough, swift, and just resolution of the numerous complaints against T-Mobile,” said Travis LeBlanc, acting chief of the FCC’s Enforcement Bureau in a statement.
In a statement, Senate Commerce, Science and Transportation Committee chairman Jay Rockefeller, D-W.Va., said he was “deeply disturbed” by the allegations.
“The FTC’s allegations only heighten my concern about the industry’s repeated assertions that voluntary oversight effectively protects consumers from cramming,” he said.
T-Mobile CEO John Legere in a statement called the lawsuit “unfounded and without merit.”
“In fact 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,” he said in the statement.
More from his statement:
This is about doing what is right for consumers and we put in place procedures to protect our customers from unauthorized charges. Unfortunately, not all of these third party providers acted responsibly—an issue the entire industry faced. We believe those providers should be held accountable, and the FTC’s lawsuit seeking to hold T-Mobile responsible for their acts is not only factually and legally unfounded, but also misdirected.