FTC Alleges That T-Mobile Made Hundreds of Millions in Phony Charges

Moneybox
A blog about business and economics.
July 2 2014 1:01 PM

T-Mobile, the “Most Pro-Consumer Company in the Industry,” Might Have Stolen Hundreds of Millions From Consumers

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John Legere, friend of 8888906150BrnStorm23918.

Photo by David Becker/Getty Images

John Legere, the infamously free-wheeling, trash-talking chief executive of T-Mobile, enraged the Internet earlier this month when he described competitors as "raping" their customers for "every penny you have." The tactless choice of words got Legere into hot water. But potentially far more devastating to T-Mobile are allegations that Legere and his company have been taking egregious advantage of customers on their own.

The Federal Trade Commission has slapped T-Mobile with a formal complaint that accuses the company of reaping hundreds of millions of dollars from phony charges it buried in users' cellphone bills. On numerous occasions, the complaint alleges, T-Mobile charged consumers for third-party subscriptions and services that they did not order or authorize—a practice known as cramming—and continued to do so even after consumers complained about the unauthorized charges. The bogus services have included monthly subscriptions to ringtones and wallpaper as well as text messages that deliver horoscopes, flirting tips, and celebrity gossip. They typically billed consumers for $9.99 a month, of which T-Mobile took a 35-40 percent cut.

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The FTC says that third-party charges were not clearly identified as such in T-Mobile's bills to users and were often hidden beneath the labels "Usage Charges" and "Premium Services." In one sample bill cited by the regulatory agency, the most information a lengthy bill included about third-party charges was a line listing "Shaboom Media" under "Other Service Provider Charges" with a $9.99 usage fee and this illuminating description: "8888906150BrnStorm23918.” The FTC notes that other customers have prepaid accounts and do not receive monthly bills from T-Mobile; in these cases, the agency writes in its complaint, unauthorized charges were deducted in the form of minutes from the user's available balance.

Never one to stay quiet, Legere published a statement on Tuesday that condemned the FTC complaint as "unfounded and without merit." He said T-Mobile had stopped billing for premium messaging services in 2013 and was working to refund customers for unwarranted charges. "We are disappointed that the FTC has chosen to file this action against the most pro-consumer company in the industry rather than the real bad actors," Legere said. On Twitter, he promoted links to his statement and declared the government complaint "lobbying work of big greedy carriers!"

Despite Legere's typically vivid comments to the contrary, it might be hard to dismiss the evidence the FTC has pulled together on this one. The agency says that internal T-Mobile documents show the company was aware of numerous consumer complaints over unauthorized charges as early as 2012—long before it moved to end them last November. The FTC also alleges that T-Mobile frequently refused to provide refunds sought by customers and "has told consumers that there is nothing it can do about the unauthorized charges." That definitely sounds like something "the most pro-consumer company in the industry" would do. For sure.

Alison Griswold is a Slate staff writer covering business and economics.

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