T-Mobile Scammed Customers for Hundreds of Millions of Dollars, FTC Claims

The Federal Trade Commission just accused T-Mobile of cheating their customers out of hundreds of millions of dollars over the course of several years by purposefully obscuring the origins of sketchy third-party SMS services, such as "free" wallpapers and ringtones.

They're not so popular now, but before everyone had smartphones and a data plan, commercials for third party services that sent you ringtones, dating advice, horoscopes, and cell phone wallpapers were all over TV. Apparently, thousands of people signed up for them, then had no idea how to unsubscribe, not least because T-Mobile made it ridiculously hard to tell what you were being charged for on the bills it sent out, a tactic known in the business as "cramming." T-Mobile gets a kickback of from those sketchy companies, and, in return, put their monthly fees on customers' bills as "usage charges," according to a complaint filed by the FTC in Washington state's Western District court.

Why call them sketchy companies? Because some of the companies offering those services had refund rates of up to 40 percent. As in, 40 percent of a given company's customers, once they found out what they actually signed up for, begged T-Mobile for a refund. The FTC alleges that the company should have taken that as a sign that something weird was going on, and should have protected its customers instead of adding more zeroes to its bottom line.

"Until at least December 2013, in addition to charging for phone services offered by Defendant [T-Mobile], Defendant has charged many consumers for other services offered by third-party merchants. These purported services have included monthly subscriptions for content such as ringtones, wallpaper, and text messages providing horoscopes, flirting tips, celebrity gossip, and other similar information (“Third-Party Subscriptions”). Defendant typically has charged consumers $9.99 per month for such Third-Party Subscriptions … Defendant has earned hundreds of millions of dollars from Third-Party Subscriptions," the complaint said.

The FTC says that the charges continued to be hidden on consumers' bills despite the fact that the company received hundreds of complaints. These charges, again, were hidden on bills as either "use charges," "usage charges," or "premium services," with no real indication of what the charges were actually for. According to the FTC complaint, the only real description of what these charges were for was often buried in the fine print some 50 pages into a customer's phone bill. Even then, descriptions could be as vague as "8888906150BrnStorm23918."

It's hard to have sympathy for people who purposefully bought text Love Testers and Crazy Frog ringtones and paid for it later, but it's even harder to have any sort of sympathy for a company who knowingly charged its customers for months and months because their dumb kid did that thing the TV commercial told them to do and the consequences of that action never showed up, in English, on their cell phone bill.

In a conference call, the FTC said it tried to reach a settlement with T-Mobile but couldn't, so this will likely play out in court.

Last month, the FTC went after the third-party crammers themselves, making the operators of Shaboom Media, Bune, Mobile Media Products, and several other sketchy companies surrender $10 million in assets. It also banned them from "placing any charges on consumers' phone bills."

In a statement released today, FTC chairwoman Edith Ramirez said the agency is trying to make T-Mobile pay its customers back for the bogus charges.

“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,” said FTC Chairwoman Edith Ramirez. “The FTC’s goal is to ensure that T-Mobile repays all its customers for these crammed charges.”

T-Mobile has yet to issue a statement about what's going on, I'll update this post when and if we hear from the company.