By Edward Wyatt and Brian X. Chen
New York Times News Service
WASHINGTON — T-Mobile, which sees itself as a new kind of carrier, now stands accused of an old-fashioned practice — overbilling its customers.
The Federal Trade Commission on Tuesday brought a legal action accusing T-Mobile of illegally earning hundreds of millions of dollars by placing bogus charges on customers’ cellphone bills for premium texting services that the consumers never ordered. Regulators said that T-Mobile had been allowing the third-party charges, and taking a hefty cut of the revenue, since 2009.
The case is one of the largest brought by regulators against a major telecommunications company for unauthorized billing, known as “cramming.” The practice has been relatively common for landlines but recently began to appear on mobile bills.
In T-Mobile’s case, the FTC said, fees for services like “flirting tips, horoscope information or celebrity gossip,” typically were for $9.99, of which 35 to 40 percent went to T-Mobile. In some cases, customers were charged for “years after becoming aware of signs that the charges were fraudulent,” it said.
Jessica Rich, director of the agency’s Bureau of Consumer Protection, said in a briefing that T-Mobile had “ignored telltale signs of fraud” in the charges, harming many consumers.
John Legere, T-Mobile’s chief executive, said in a statement that the FTC’s accusations were without merit.
Also Tuesday, the Federal Communications Commission said it was investigating T-Mobile’s billing practices after receiving consumer complaints. The commission and the FTC are the two main regulators of the telecommunications industry.
The inquiry and the accusations come at an awkward time for T-Mobile, which has been reported to be in talks with Sprint for a merger that would have to be approved by the FCC. T-Mobile has trumpeted itself in its ad campaign as the “Un-carrier” by eliminating things that frustrate customers, such as hidden charges and two-year contracts. For its efforts, the company has won praise and millions of customers.
Some of the charges resulted in refunds being given to 40 percent of the customers who asked for them, “an obvious sign to T-Mobile that the charges were never authorized by its customers,” the FTC said.
“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 Edith Ramirez, the FTC chairwoman. “The FTC’s goal is to ensure that T-Mobile repays all its customers for these crammed charges.”