The Federal Trade Commission is charging mobile phone service provider T-Mobile USA with making hundreds of millions of dollars by placing charges on mobile phone bills for purported "premium" SMS subscriptions that, in many cases, were bogus charges that were never authorised by its customers.
The FTC alleges that T-Mobile received anywhere from 35 to 40 percent of the total amount charged to customers for subscriptions for content such as flirting tips, horoscope information or celebrity gossip that typically cost USD 9.99 per month. According to the FTC's complaint, T-Mobile in some cases continued to bill its customers for these services offered by scammers years after becoming aware of signs that the charges were fraudulent.
In a process known as third-party billing, a phone company places charges on a consumer's bill for services offered by another company, often receiving a substantial percentage of the amount charged. When the charges are placed on the bill without the consumer authorisation, it is known as "cramming".
The FTC's complaint alleges that in some cases, T-Mobile was charging consumers for services that had refund rates of up to 40 percent in a single month. The FTC has alleged that because such as large number of people were seeking refunds, it was an obvious sign to T-Mobile that the charges were never authorised by its customers. As the complaint notes, the refund rate likely significantly understates the percentage of consumers who were crammed. The complaint also states that internal company documents show that T-Mobile had received a high number of consumer complaints as early as 2012.
The complaint against T-Mobile alleges that the company's billing practices made it difficult for consumers to detect that they were being charged. When consumers viewed a summary of their T-Mobile bill online, according to the complaint, it did not show consumers that they were being charged by a third party, or that the charge was part of a recurring subscription. The heading under the charges would be listed, "Premium Services," could only be seen after clicking on a separate heading called "Use Charges." However, even after clicking, consumers could not see the individual charges.
The complaint also alleges that T-Mobile's full phone bills, which can be longer than 50 pages, made it nearly impossible for consumers to find and understand third-party subscription charges. After looking past a "Summary" section as well as an "Account Service Detail" section, both of which described "Usage Charges" but did not itemise those charges, a consumer might then reach the section labelled "Premium Services," where the crammed items would be listed.
According to the complaint, the information would be listed there in an abbreviated form, such as "8888906150BrnStorm23918," that did not explain that the charge was for a recurring third-party subscription supposedly authorised by the consumer. In addition, the complaint notes that consumers who use pre-paid calling plans do not receive monthly bills, and as a result the subscription fee was debited from their pre-paid account without their knowledge.
When consumers were able to determine they were being charged for services they hadn't ordered, the complaint alleges that T-Mobile in many cases failed to provide consumers with full refunds. The FTC charged that T-Mobile refused refunds to some customers, offering only partial refunds of two months' worth of charges to others, and in other cases instructed consumers to seek refunds directly from the scammers, without providing accurate contact information to do so.
The complaint also notes that in some cases, T-Mobile claimed that consumers had authorised the charges despite having no proof of consumers doing so.
The FTC's complaint seeks a court order to permanently prevent T-Mobile from engaging in mobile cramming and to obtain refunds for consumers and disgorgement of T-Mobile's ill-gotten gains.
