FTC charges T-Mobile with bogus third-party billing

Summary:The FTC will seek to return "many of millions" of dollars to consumers who were deceptively charged with third-party app fees in a process referred to as cramming.

The Federal Trade Commission charged mobile service provider T-Mobile with making hundreds of millions of dollars off of bogus third-party billing. 

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In a nutshell, T-Mobile is charged with a shoddy process called cramming, which places charges on a consumer's bill for services offered by another company, and gives T-Mobile a hefty 35 to 40 percent cut from the total amount charged.

The FTC's consumer protection director Jessica Rich said in a conference call that the FTC, through litigation, will seek to return "many of millions" of dollars to consumers impacted by the cramming charges.

Rich added that the FTC and T-Mobile had previously attempted settlement negotiations following "oodles of consumer complaints", but obviously failed to reach one.

The FTC claims that T-Mobile continued cramming until at least December 2013, capping off a four-year period of belligerence and disregard for consumers that amounted to the staggering profits for bogus charges.

T-Mobile chief executive John Legere said following the FTC's announcement that the charges were "unfounded and without merit." He claimed the company last year "launched a proactive program" for full refunds to customers thought to be affected by unauthorized charges.

Legere added:

"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."

T-Mobile still has some serious explaining to do when the case does make it to a courtroom, especially in regard to the level it allegedly went to in order to deceive customers. Rich said T-Mobile buried the third-party charges in consumers' phone bills, sometimes hundreds of pages deep. When consumers finally began to track down the charges and complain to T-Mobile, the mobile carrier refused refunds to some, gave partial refunds to others, and instructed the rest to seek refunds directly from the third-party merchants. 

What's unclear — and what Rich and others on the conference call declined to comment on — is whether the lawsuit will impact the potential T-Mobile/Sprint merger.

Updated at 5:00pm ETwith comment from T-Mobile.

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Topics: Mobility

About

Natalie Gagliordi is a staff writer for CBS Interactive based in Louisville, Kentucky, covering business technology for ZDNet. She previously worked as the editor of Kiosk Marketplace, an online B2B trade publication that focused on interactive self-service technology, while also contributing to additional websites that covered retail tec... Full Bio

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