Mobile phone service provider T-Mobile USA Inc. was charged Tuesday by the Federal Trade Commission with making hundreds of millions of dollars by placing charges on phone bills for purported "premium" subscriptions that, in many cases, were bogus charges and never authorized by customers.
T-Mobile received anywhere from 35% to 40% of the total amount charged to consumers for subscriptions for content such as flirting tips, horoscope information or celebrity gossip that commonly cost $9.99 per month, the FTC alleges. The company in some cases kept billing its customers for these services offered by scammers for many years after becoming aware of signs that the charges were fraudulent, according to the complaint.
In some cases, T-Mobile charged consumers for services that had refund rates of up to 40% in a single month. The FTC has alleged that because such a large number of people sought refunds, it was an obvious sign to T-Mobile that the charges were never authorized. As the complaint notes, the refund rate likely significantly understates the percentage of consumers who were victims.
The complaint also states that internal company documents show that T-Mobile had received a high number of consumer complaints at least as early as 2012.
The process known as "third-party billing" entails a phone company placing charges on a consumers 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 consumers authorization, it is known as "cramming."
"The FTCs goal is to ensure that T-Mobile repays all its customers for these crammed charges," said FTC Chairwoman Edith Ramirez. "Its 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 complaint against T-Mobile alleges that the companys billing practices made it hard for consumers to detect they were being charged, much less by whom. 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 which the charges were listed, "Premium Services," could only be seen after clicking on a separate heading called "Use Charges." Even after clicking, though, consumers still could not see the individual charges.
The complaint alleges that T-Mobiles 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 itemize those charges, a consumer might then reach the section labeled "Premium Services," where the crammed items would be listed.
According to the complaint, the information was listed in an abbreviated form, such as "8888906150BrnStorm23918," that did not explain that the charge was for a recurring third-party subscription supposedly authorized by the consumer. The complaint further 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 learned they were being charged for services they hadnt ordered, T-Mobile in many cases failed to provide consumers with full refunds, the complaint alleges. The FTC charged that T-Mobile refused refunds to some customers, offering only partial refunds of two months worth of the 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 seeks a court order to permanently prevent T-Mobile from engaging in mobile cramming and to obtain refunds for consumers.
Last month, Collections & Credit Risk reported the operators of a massive mobile cramming scheme will surrender more than $10 million in assets - including bank accounts, jewelry, real estate in Los Angeles, Beverly Hills and Chicago and several cars - to settle charges.
Lin Miao and corporate defendants - Tatto Inc., Shaboom Media LLC, Bune LLC, Mobile Media Products LLC, Chairman Ventures LLC, Galactic Media LLC, and Virtus Media LLC - are permanently banned from placing any charges on consumers' phone bills, making any misrepresentations about a product or service or a consumers obligation to pay and are banned from charging consumers for a product or service without their express consent.