Marcy Gordon, ASSOCIATED PRESS
WASHINGTON (AP) — T-Mobile US will pay up to $90 million, mostly in refunds, for billing customers for cellphone text services they didn’t order, under a settlement with federal regulators.
The Federal Trade Commission announced the agreement Friday with T-Mobile over billing for unauthorized charges, a practice known as “cramming.” T-Mobile, the fourth-largest U.S. cellphone company, is paying refunds to affected customers plus $18 million in fines to the 50 states and the District of Columbia, and $4.5 million in fines to the Federal Communications Commission.
The FTC sued T-Mobile in July, accusing it of billing customers for subscriptions to text services like $9.99-per-month horoscopes or celebrity gossip updates that they didn’t want or authorize.
“Consumers should never have to pay for services they have never requested,” said Michigan Attorney Bill Schuette. “We will continue to aggressively advocate for families across Michigan and ensure they are treated with the fairness they deserve.” Schuette said his Consumer Protection Division has secured $349,000 from the sweeping national settlement, which will go to the Michigan General Fund. It is estimated that about 136,000 Michigan T-Mobile consumers incurred an un-refunded T-Mobile PSMS charge and may be eligible for refund under the restitution program.
T-Mobile collected 35 percent to 40 percent of the charges, even after being alerted by customers that they were bogus, the FTC alleges.
A T-Mobile spokeswoman said the company had no immediate comment on the settlement. T-Mobile began a refund program in July and has said it has notified current and former customers. The company didn’t provide an estimate of how much it has paid in refunds to date.
Many consumers aren’t aware that third-party companies can put charges on their phone bills for text services, regulators say.
T-Mobile US Inc., based in Bellevue, Washington, is controlled by Germany’s Deutsche Telekom AG. It’s the No. 4 U.S. cellphone carrier after Verizon Wireless, AT&T and Sprint.
Under the settlement, T-Mobile must provide full refunds to all its customers affected by the “cramming,” and the amount it pays in refunds and fines must reach at least $90 million. If the payout doesn’t reach that amount, the difference between what T-Mobile pays and $90 million will go to the FTC for additional relief to consumers, consumer education or other uses.
T-Mobile also must contact all of its affected customers, both current and former, to tell them about the refund program and how they can make a claim. That must be done in a “clear and conspicuous way,” the FTC said. Going forward, T-Mobile must get customers’ explicit consent before putting third-party charges on their bills. The company must clearly indicate any third-party charges on the bills.
The settlement with T-Mobile came two days after another federal regulator, the Consumer Financial Protection Bureau, sued rival Sprint Corp. for alleged cellphone “cramming.” The CFPB is seeking an unspecified money penalty against Sprint.
“Always review cellphone bills thoroughly for charges that are unfamiliar or you don’t understand,” Schuette advised consumers. “Ignoring small charges can add up to big amounts. Some cramming charges can be as small as $2 or $3 per month and could be easy to miss. Before paying suspicious charges, consult with your cellphone provider to be sure you are paying for services that you authorized; your bill statement should explain how to dispute errors.”
Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.