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T-Mobile USA has raked in hundreds of millions of dollars by billing customers for “premium" SMS subscriptions that were often baseless fees that customers had not authorized, a practice known as “cramming," the Federal Trade Commission alleges in a lawsuit filed Tuesday in federal court.
The wireless carrier received between 35 and 40 percent of the total amount charged to customers by third parties for subscriptions to content that generally cost $9.99 per month, such as celebrity gossip, horoscope information and flirting tips, according to the FTC in a press release. In some cases, the agency alleged, T-Mobile billed for the services that scammers offered years after discovering signs the charges were fraudulent.
“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," FTC Chairwoman Edith Ramirez said in a statement. “The FTC’s goal is to ensure that T-Mobile repays all its customers for these crammed charges."
In a 17-page lawsuit filed in the U.S. District Court for the Western District of Washington, the FTC is seeking an order to permanently bar T-Mobile from engaging in mobile cramming practices. The agency also is requesting an order demanding T-Mobile cough up its ill-gotten gains and provide refunds to consumers.
T-Mobile’s billing practices made it difficult for customers to discover that they were being charged because its online bill didn’t disclose that a third party was charging them or that the bill was part of a recurring subscription, according to the FTC. Customers had to click on a separate heading called “Use Charges" to see the third-party charges, the agency said, and some customers still couldn’t identify the separate charges after doing so. T-Mobile’s full phone bills also made it virtually impossible for customers to identify the third-party subscription charges, the FTC said.
T-Mobile should have picked up on the fact that customers weren’t authorizing charges considering that some consumers were being charged for services that had refund rates of up to 40 percent in one month, the agency said. As early as 2012, internal company documents show, T-Mobile had been receiving a high number of complaints from consumers, according to the FTC.
John Legere, CEO of T-Mobile USA, declared the lawsuit is “unfounded and without merit."