The Federal Trade Commission has filed a complaint regarding T-Mobile’s past practices for premium third-party premium SMS services, alleging that T-Mobile made millions of dollars by allowing companies to tack high monthly fees onto its customers’ bills, while often pocketing between 30% to 40% of those fees, a practice often referred to in the industry as ‘cramming’. The FTC further alleges that T-Mobile knew about the potential fraudulent charges made against its customers in 2012, but didn’t begin to take action against the complaints until last year.
Late last year, the carrier announced along with two others that it tried to regulate premium SMS services, but its partners were breaking the rules and ended support for premium SMS as a result, while agreeing to refund some customers. T-Mobile recently reminded those customers affected to check their eligibility for those refunds.
The FTC complaint further suggests that T-Mobile often hid third-party charges in difficult-to-understand monthly bills and the regulator also believes T-Mobile didn’t provide customers with full refunds, flat-out refused to refund some customers, and in some cases told customers to recoup the charges directly from the fraudulent services without providing contact details. FTC Chairwoman Edith Ramirez issued the following statement in the complaint:
“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. The FTC’s goal is to ensure that T-Mobile repays all its customers for these crammed charges.”
The FTC is seeking a court order to permanently prevent T-Mobile from engaging in mobile cramming, to obtain refunds for consumers, and to relieve T-Mobile of any profits earned from the alleged actions, which are alleged to be in the hundreds of millions of dollars. The FTC’s complaint differs significantly from the story told by T-Mobile regarding the premium SMS billing problems, as T-Mobile’s previous efforts on behalf of its customers appear not to have convinced the FTC from taking its own actions to address the problem. T-Mobile CEO John Legere reacted to the complaint in a rather belligerent manner first on his Twitter account, before releasing a more formal statement on the complaints hours later:
We have seen the complaint filed today by the FTC and find it to be 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. T-Mobile is fighting harder than any of the carriers to change the way the wireless industry operates and we are disappointed that the FTC has chosen to file this action against the most pro-consumer company in the industry rather than the real bad actors.
As the Un-carrier, we believe that customers should only pay for what they want and what they sign up for. We exited this business late last year, and announced an aggressive program to take care of customers and we are disappointed that the FTC has instead chosen to file this sensationalized legal action. We are the first to take action for the consumer and I am calling for the entire industry to do the same.
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.
The FCC has also announced its own complaint against T-Mobile regarding the same problem and has announced that it will work to address the problem alongside the FTC.
Premium SMS services reached their apex in the mid-2000s when they were frequently advertised on TV, typically with cheap, poorly produced commercials that ran late at night or in the mid-morning hours touting such services such as humor, ringtones and horoscopes, that were promoted as being charged at low rates or even free, but made no mentions of being billed on a monthly basis, unless one listened rather closely to the audio for the announcer detailing the disclaimers, typically at high speed. Such services were also advertised as replacements for mobile web access which was usually more expensive to access the same information at the height of the popularity for premium SMS.
