By Peter Reap, J.D., LL.M.
Mobile phone carrier 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 FTC lawsuit filed earlier this year.
In addition to the full refunds T-Mobile is providing, which will resolve the FTC’s 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.
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.
“Mobile cramming is an issue that has affected millions of American consumers, and I’m 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.”
In its complaint, which the FTC filed against the mobile carrier in July, the FTC alleged that the company placed millions of dollars in unwanted third-party charges on its customers’ mobile phone bills, receiving 35 to 40 percent 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 FTC’s complaint alleged 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.
According to the complaint, T-Mobile’s phone bills made it nearly impossible for consumers to find and understand third-party subscription charges. The complaint 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.
In addition to 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.
The settlement with T-Mobile comes on the heels of a similar settlement that the FTC reached with AT&T on October 8, 2014. Under the terms of that settlement, AT&T agreed to pay $80 million to the FTC for consumer refunds due to mobile cramming.
The Commission vote approving the proposed stipulated order was 5-0.
MainStory: TopStory ConsumerProtection FederalTradeCommissionNews
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