In yet another case of corporate malfeasance (which we are sure will see heavy jail sentences and sever punishments), the Federal Trade Commission is charging T-Mobile 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 authorized by its customers. Content such as flirting tips, horoscope information or celebrity gossip was charged to customers unknowingly and even when customers figured it out, T-Mobile failed to provide consumers with full refunds. Is it any wonder Telcos are doing so well?
What to look for in your bill to see if you were duped by your caring telco:
From the lawsuit (link)
Defendant has not obtained authorization from consumers before charging them for Third-Party Subscriptions. Instead, the third-party merchants or billing intermediaries purportedly have obtained authorization. In many cases, however, these third parties have failed to obtain authorization from consumers.
Defendants’ phone bills include charges for its own services and third-party services. For consumers who receive their bills online, Defendant has provided an online summary:
In this summary, third-party charges, including for Third-Party Subscriptions, are included in the total for “Use Charges.” If the consumer clicked to expand the field for “Use Charges,” the consumer saw the following screen:
The category “Use charges” has included such charges as text messaging, as well as “Premium Services.” This screen, however, provides no explanation that “Premium Services” includes third-party charges for recurring Third-Party Subscriptions, nor does this section provide any additional information about the charges
A breakout of the actual third-party charges has typically appeared in the middle or towards the end of the bill, which in some instances may exceed 50 pages in length, under the heading “Premium Services.”
The information listed in this subsection has appeared in an abbreviated form (“8888906150BrnStorm23918”) that has not provided detailed information to the consumer about the nature of the charge. It has not explained that the charge was for a recurring Third-Party Subscription that the consumer purportedly authorized.
Some consumers do not even receive mobile phone bills. Consumers with pre-paid accounts do not receive monthly bills from Defendant; instead, these consumers pay a certain amount of money upfront for a specific number of minutes. When an unauthorized charge for $9.99 has been charged to these consumers’ accounts, Defendant has deducted $9.99 worth of minutes from their available balance. Defendant typically has provided no notice to the consumer of the charge.
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Full FTC Statement
FTC Alleges T-Mobile Crammed Bogus Charges onto Customers' Phone Bills
T-Mobile Was Aware For Years that Charges Were Not Authorized by its Customers
In a complaint filed today, the Federal Trade Commission is charging mobile phone service provider T-Mobile USA, Inc., 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 authorized by its customers. The FTC alleges that T-Mobile received anywhere from 35 to 40 percent of the total amount charged to consumers for subscriptions for content such as flirting tips, horoscope information or celebrity gossip that typically cost $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.
"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."
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's authorization, 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 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. 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 at least as early as 2012.
The FTC has made significant efforts to end mobile cramming. In the last year, in addition to holding a public workshop on mobile cramming, the Commission has filed several lawsuits against alleged mobile cramming operations Jesta Digital, Wise Media, and Tatto Inc.According to today's complaint, T-Mobile billed its customers for the services of these FTC defendants as well as an operation sued by the Texas Attorney General.
The complaint against T-Mobile alleges that the company's billing practices made it difficult for consumers to detect that 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 would be 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 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 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 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 authorized 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. Indeed, 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 also notes that in some cases, T-Mobile claimed that consumers had authorized 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.
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Consequences? A fed-funded fine? Cost of doing business we presume...