FTC charges T-Mobile with bogus third-party billing

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.

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TOPICS: Mobility
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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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Topic: Mobility

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10 comments
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  • This one should be referred to the Justice Department

    If the allegations are true, then the proper response is criminal prosecution rather than a mere lawsuit (the FTC has no prosecutorial authority).
    John L. Ries
    • RICO

      charge them under RICO for extortion and grand theft
      Mike~Acker
      • If RICO is applicable...

        ...then senior management and any culpable directors should be prosecuted personally, giving the stockholders an opportunity to put the company on a more honest footing after the crooks are removed and jailed.

        We don't have enough competition in the mobile sector as it is; so I would be loath to take the fourth largest provider out of the picture.
        John L. Ries
  • It's acceptable to be a thief and scam artist in today's business

    Look at all the so-called reputable companies who pull every trick in the book to deceive consumers, ranging from telcos to banks to retailers. 9 out of 10 Android apps have embedded spyware, the number is only slightly less on the Apple side. Tech companies think nothing of downloading spyware to your PC in everything from installers to paid commercial software.

    In short, it is completely acceptable in today's business climate to be a scammer and a thief. Consumers don't seem to care anymore, or they are too busy watching deceptive TV ads instead of reading Consumer Reports or even a newspaper article.
    terry flores
    • It's the consequence...

      ...of the doctrine that corporations exist for the sole purpose of making as much money as the law will permit (ethics don't matter). By encouraging people to leave their personal morals at the office door and even subjecting managers to lawsuits if they don't, we encourage amoral behavior that in the end is bad for everyone (an executive who cheats his customers and employees will cheat his stockholders too).
      John L. Ries
  • Reporting of this is very confusing

    Cramming is a third party posting charges to a phone number that no one ordered. They are not originated by the carrier. It's a variation of the old slamming of a long distance carrier by little companies setup just for that purpose. I'm not sure what they're specifically complaining about with T-Mobile except maybe they didn't follow all the rules for showing these charges on the bill.
    Buster Friendly
    • The ONLY reason this works is because the phone companies want it

      Scammers can't just add charges to any utility bill without the complicity of the billing company. The telcos welcome all of the loopholes that allowed them to do this without explicit customer approval and fiercely lobbied the FCC to dilute any oversight.

      As the article mentioned, the telco kickback for many of these services ranges from 40 percent in T-Mobile's case to 80 percent in some AT&T cases a few years back. So there is a powerful monetary incentive (greed) to scam the customers.
      terry flores
  • check Verizon too...

    My bill goes up $2 a month... with this fee and that fee... multiply that by number of customers and they are lining their pockets with millions extra every month.

    I left AT&T because of the same tactics then they slammed me twice so I had my account locked to prevent slamming.
    greywolf7
    • cramming overage charges

      my daughter had to dump verizon because they kept cramming 'overage' charges on her bill but could not explain what data was transmitted for
      Mike~Acker
      • Data charges

        I had that on Verizon too at one point, back before the smartphone era. I finally told them that I didn't authorize any data transfers except my nightly contacts backup. They ended up being able to lock out all other apps and refunded all my $2 charges.
        trybble1