By Alexandra Burlacu | Jul 02, 2014 07:05 AM EDT
T-Mobile USA faces charges of taking hundreds of millions of dollars from customers over unauthorized text-message charges.
The self-branded Un-carrier faces a lawsuit from the Federal Trade Commission (FTC), while the Federal Communications Commission (FCC) has opened up an investigation to look into the matter. The two government agencies claim that T-Mobile charged its customers for premium text messages against their will, and without even informing them.
These claims come as T-Mobile is pushing its Un-carrier strategy, claiming to be the fairest of all carriers and bashing its rivals for imposing insane charges and conditions on their customers.
The FTC complaint alleges that T-Mobile garnered great revenues from marketing companies who signed subscribers up to receive premium SMS messages and continued to charge fees for said messages even after users had opted out.
According to the suit the FTC filed, T-Mobile allowed third-party firms to add monthly fees to bills. This allegedly occurred between 2009 and 2013, and T-Mobile received a 35 - 40 percent share out of this whole scheme. The carrier reportedly ignored or dismissed any complaints in which customers disputed those charges, as it was making good money from the deal, the suit further claims.
"In numerous instances, Defendant has charged consumers for Third-Party Subscriptions that the consumers did not order or authorize, a practice known as cramming. Defendant has continued to charge consumers for Third-Party Subscriptions even after large numbers of consumers complained about unauthorized charges. Refund rates for the subscriptions were high - in some cases as high as 40%. Further, Defendant has continued to charge consumers for Third-Party Subscriptions even after industry auditor alerts, law enforcement and other legal actions, and news articles indicated that the third-party merchants were not obtaining valid authorization from consumers for the charges," alleges the FTC suit.
"Some consumers who became aware of unauthorized charges have complained to Defendant that they did not authorize the charges. Defendant's own internal documents demonstrate that consumers were complaining in increasing numbers about unauthorized charges from at least early 2012. These documents state that there had been an increase in complaints, explain that consumers 'do not know what the charges are or why they are being billed for them' and note several third-party merchants that Defendant's employees had identified as being the subject of many complaints. Despite knowing about these unauthorized charges Defendant did not take sufficient steps to determine whether other consumers actually authorized the charges for Third-Party Subscriptions purportedly offered by the problematic third-party merchants."
"Furthermore, when consumers have sought refunds for unauthorized charges from Defendant, Defendant frequently has refused to provide them. In some instances, Defendant has told consumers that there is nothing it can do about the unauthorized charges or that it would block future charges, but then failed to do so," the suit further alleges.
The irony is precious, as just last year T-Mobile was part of a group of U.S. carriers that vowed to stop charging subscribers premium fees for SMS messages, as part of a bigger effort to fight fraud.
The FTC further calls on T-Mobile to provide users with refunds for all the revenues it made from these cramming practices before it implemented the anti-premium SMS policy. The FCC, meanwhile, is still in the investigation stage, but if it also decides to file a lawsuit against T-Mobile, the carrier could face hefty fines over its practices.
For its part, T-Mobile USA dismissed the FTC suit as "unfounded and without merit," and blamed everything on marketing firms. In a statement released Tuesday, July 1, T-Mobile CEO John Legere said that some third-party providers did not act properly and they should be the ones to be held accountable. Legere further states that FTC's attempt to hold T-Mobile responsible for the acts of third-party providers is factually and legally unfounded, as well as misdirected.