For $90 million, the Federal Trade Commission and T-Mobile reached a deal over the agency’s accusations that the company illegally crammed charges onto consumers’ mobile phone bills.
The agency filed suit in July alleging T-Mobile crammed charges on mobile bills for services like love tips, horoscopes, and celebrity gossip, for which the company received between 35 and 40 percent of the charges, typically $9.99 per month.
According to the Commission, the company not only facilitated the charges, but should have known they were not authorized, in light of the up to 40 percent refund rates in a single month. The agency also said that T-Mobile’s complicated bills often buried the third-party charges in more than 50 pages, and also made it difficult for consumers to discover the cramming.
To settle the suit, T-Mobile promised to provide full refunds to all affected consumers to the tune of $90 million, either in redress or other form of payment. The deal requires that the company contact each of its current and former customers who received cramming charges and explain the refund program and claims process in a clear and concise manner.
In addition, the company agreed to pay $18 million in fines and penalties to the attorneys general of all 50 states and the District of Columbia, as well as $4.5 million to the Federal Communications Commission. If the company’s final payout – including the $22.5 million to the states and FCC – falls short of the $90 million, T-Mobile will pay the balance to the FTC.
Going forward, T-Mobile must obtain express, informed consent from customers prior to placing third-party charges on their bills and provide information to consumers about how to block third-party charges.
“Mobile cramming is an issue that has affected millions of American consumers, and I’m pleased that this settlement will put money back in the hands of affected T-Mobile customers,” FTC Chairwoman Edith Ramirez said in a press release about the case. “Consumers should be able to trust that their mobile phone bills reflect the charges they authorized and nothing more.”
To read the complaint and the proposed consent order in FTC v. T-Mobile, click here.
Why it matters: Mobile cramming was a priority for the FTC in 2014. In addition to the suit against T-Mobile, the agency took several other actions, including filing suit against a group of defendants who allegedly made more than $100 million from mobile cramming. The FTC also issued a staff report and testified before Congress on the issue.