T-Mobile’s U.S. division has agreed to pay at least $90 million largely in refunds for billing customers for text services they didn’t ask for in a settlement with the federal government.
The Federal Trade Commission announced the settlement on the case Friday, which had to do with the practice of “cramming,” when cell phone companies attempt to overbill for unauthorized charges. T-Mobile will issue $67.5 million worth of refunds to customers, and pay an additional $18 million in fines to all 50 states and the District of Columbia, and $4.5 million in fines to the FTC, according to the Associated Press.
T-Mobile was sued in July when the FTC accused it of billing customers $9.99 per month for horoscopes, ringtones, and celebrity gossip when users didn’t authorize the charges.
Despite being notified by customers that the charges were unauthorized, T-Mobile continued to collect up to 40 percent of the charges, earning hundreds of millions of dollars, according to the FTC.
It was during the investigation that the feds found that T-Mobile was “in bed with the crammers,” said Travis LeBlanc, head of the FTC’s enforcement bureau.
Many times, these third-party companies will collaborate with the service provider to place bogus charges on phone bills, a practice that many customers weren’t aware was happening.
T-Mobile is not out of the woods yet. The FTC called the $90 million a “floor,” not a ceiling, and the end result of their practices could be fines and refunds that stretch well past $100 million, officials said.
T-Mobile declined to comment on the settlement. It said it began a refund program in July and has notified the affected customers. No estimate on total refunds paid had been provided.
T-Mobile is the 4th largest cell phone carrier after Verizon, AT&T and Sprint.
The lawsuit was filed in federal court in Seattle, which is where T-Mobile is based. The company is owned by a Germany telecommunications company.
Cramming is a form of fraud in which small charges are added to a bill without the consumer’s authorization and without disclosing it to the consumer in the hopes of racking up charges over time. Crammers usually bank on customers not closely scrutinizing their monthly bill for small discrepancies. It is one of the most common consumer complaints.
