Wireless carrier T-Mobile has agreed to pay $90 million to settle charges that it profited by allowing third-party billers to bilk its customers by "cramming" unwanted charges onto their phone bills, the Federal Communications Commission said Friday.
Several recent moves by government regulators have tried to curtail similar practices by mobile phone carriers.
On Wednesday, the Consumer Financial Protection Bureau sued Sprint, the third-leading carrier, 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.
A third Washington agency 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 since 2009 for services such as flirting tips, horoscopes, and antivirus scans - items that typically cost T-Mobile subscribers $9.99 a month. 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 by the FTC and all 50 states.
The agreement announced Friday calls for T-Mobile to establish a redress fund of $67.5 million. The FCC said 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.
After the lawsuit was filed this summer, T-Mobile called it "unfounded and without merit," though it said it had already begun offering refunds for the PSMS charges at issue. The company made no statement Friday, but CEO John Legere responded to a critic on Twitter by writing that "while I don't agree with the gov't allegations, I do make customers our priority, no matter what."
The T-Mobile settlement illustrated how crammers slip charges past consumers who are sometimes mystified by the wording of bills. For instance, the agreement says, 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."
Cramming works for several reasons, regulators say. One is that charges are inscrutable. Another is that crammers have learned that if they bill a lot of people a little money, they can make large amounts of money without being noticed.
But a key element is carrier complicity, according to the CFPB's case against Sprint, which the agency said had been allowing so-called aggregators to bill via its phone bills at least since 2004.
The CFPB said Sprint outsourced payment processing for digital purchases ranging from 99 cents to $9.99 to vendors called "billing aggregators" without properly monitoring them.
"Sprint's system attracted and enabled unscrupulous merchants who, in some cases, only needed consumers' phone numbers to cram illegitimate charges onto wireless bills," the CFPB said.