T-Mobile has agreed to fully refund its customers for unwanted third-party charges it placed on their phone bills, a practice known as mobile cramming, paying at least $90 million to settle a Federal Trade Commission lawsuit filed earlier this year.
Along with the full refunds, which will resolve the FTCs lawsuit if approved by the court, T-Mobile is paying $18 million in fines and penalties to the attorneys general of all 50 states and the District of Columbia and $4.5 million to the Federal Communications Commission.
"Mobile cramming is an issue that has affected millions of American consumers, and Im pleased that this settlement will put money back in the hands of affected T-Mobile customers," said FTC Chairwoman Edith Ramirez. "Consumers should be able to trust that their mobile phone bills reflect the charges they authorized and nothing more."
Under the terms of the settlement, T-Mobile will be required to offer full refunds to all affected consumers. The amount of money the company pays must reach at least $90 million in redress or other payments. Should the company fail to do so, the balance must be remitted to the FTC for additional consumer redress, consumer education, or other uses. The settlement requires T-Mobile to contact all of its crammed customers current and former to inform them of the refund program and claims process, and to do so in a clear and conspicuous way.
The FTC filed suit against T-Mobile in July, alleging the company placed millions of dollars in unwanted third-party charges on its customers mobile phone bills, receiving 35% to 40% of every charge they placed. The charges were for services like horoscopes, love tips and celebrity gossip, for which T-Mobile typically billed consumers $9.99 per month.
The FTCs complaint alleges that in some cases, T-Mobile was charging consumers for services that had refund rates of up to 40% in one month. The FTC has alleged that because such a large number of people were seeking refunds, it was an obvious sign to T-Mobile that the charges were never authorized by its customers.
According to the FTCs complaint, T-Mobiles phone bills made it nearly impossible for consumers to find and understand third-party subscription charges. The FTCs complaint against T-Mobile noted that in many instances information about the third-party charges crammed on to customers bills was buried deep in phone bills that totaled more than 50 pages in length.
Along with requiring T-Mobile to provide consumers with full refunds, the settlement requires the company to get consumers express informed consent before placing third-party charges on their bills. The company also must ensure that consumers are notified of any third-party charges on their bills and provide them with information about the option to block third-party charges.