Just yesterday, it seems, I was giving T-Mobile credit for targeting another wireless industry "gotcha" - tricky sales methods for online data that it says cost consumer billions of dollars a year. Today, T-Mobile is taking the Business Walk of Shame: settling charges that it profited by allowing tricky third-party billers to bilk its unsuspecting customers by "cramming" pointless charges onto their phone bills. The Federal Communications Commission says the fourth-place "Un-Carrier" has agreed to pay $90 miillion to put the embarrassing allegations behind it.
This is a long story, and nearly every carrier - landline as well as wireless - seems to have gotten into the game. Just this Wednesday, the Consumer Financial Protection Bureau sued third-place Sprint over cramming, accusing it of profiting from "tens of millions of dollars" in unauthorized third-party charges on its bills, and ignoring red flags that should have made the trickery clear. In October, AT&T agreed to pay $105 million to settle cramming charges.
It was actually a third Washington agency that brought T-Mobile's cramming to light. The Federal Trade Commission sued the carrier this summer, accusing it of collecting hundreds of millions of dollars from its customers for services such as flirting tips, horoscopes, and antivirus scans - items that typically cost T-Mobile subscribers $9.99 a month, which is about the limit for companies' trying to sneak these maybe-no-one-will-notice charges onto your bills. Worst of all: Even prepaid customers, who never received any bills showing them, were dinged.
"Yet again we are faced with a phone company that profited while its customers were fleeced by third parties who placed unauthorized charges on their phone bills," Travis LeBlanc, who heads the FCC's Enforcement Bureau, said in a statement about a settlement that was joined in by the FTC and all 50 states.
The deal calls for T-Mobile to establish a redress fund of $67.5 million. The FCC says that "if consumer claims exceed this amount, T-Mobile will continue to pay them." A special website, www.t-mobilerefund.com, has been established to process claims over the so-called "Premium SMS" services.
Crammers are masters of the game, as the settlement with T-Mobile again illustrates. The agreement says, for instance, that T-Mobile's bills often presented the PSMS charges as associated with "a string of digits and letters, such as, for example, '8888906150BrnStorm23918,' which did not clearly identify the nature and source of the charge." FCC investigators found complaints showing that when consumers complained, they would say things like: "T-Mobile is charging me extra and is making it difficult to prove who initiated these charges?" Others complained - like phone customers everywhere - that T-Mobile's bills were confusing, so "who knows what these [charges] arefor anyway."
T-Mobile also ignored obvious red flags, the FCC says. Even when it found that "the refund rate for a third-party merchant exceeded 15 percent, T-Mobile would nevertheless still continue to charge its customers for other subscriptions offered by that merchant."
Cramming works for several reasons. One is that charges are inscrutable. Another is that crammers have learned that if they bill a lot of people for a little money, they can make huge wads of cash without being noticed. But a key element is carrier complicity - that T-Mobile, AT&T and others who have played along know their billing systems are being used to trick their customers, but they put up with it for a cut of the take. Thankfully, they are finally being called on it more aggressively - as Verizon Wireless was in 2010 when it paid $78 million to settle a case over mysterious $1.99-per-megabyte data charges that appeared on the bills of customers who didn't intentionally buy any data.
State and federal regulators have pushed back against this practice for years, so we can only hope that the latest settlements finally end it. But the next time someone complains to you about "too much regulation," you might want to tell them to cram it.