July 2 (Bloomberg) -- T-Mobile US Inc. was sued by the U.S. Federal Trade Commission over claims the wireless carrier placed unauthorized third-party charges on customer bills.
T-Mobile profited from bogus charges for subscriptions to content such as celebrity gossip and horoscope information sent by text messages that typically cost $9.99 per month, the FTC said in a statement today.
“It is wrong for a company like T-Mobile to profit from third-party charges when there were clear warning signs that those charges were fraudulent,” Jessica Rich, the director of the agency’s consumer protection bureau, told reporters on a conference call.
In third-party billing, a phone company places charges on a consumer’s bill for services offered by another company, often receiving a percentage of the amount charged. When the charges are placed on the bill without authorization, the practice is known as “cramming.”
T-Mobile disregarded “telltale signs of fraud” such as high refund rates, and it continued billing customers despite complaints, Rich said. The carrier also “deceptively hid” the charges on its bills, making it difficult for customers to detect them, according to Rich.
John Legere, chief executive officer of T-Mobile, said in a statement the FTC complaint was “unfounded and without merit.” He said the third-party providers “should be held accountable” and that the FTC’s lawsuit was “misdirected.”
Legere also tweeted about the case: “Did the FTC just wake up? I’ve made it clear cramming is bad. Customers only pay for what they want at T-Mobile!”
T-Mobile, based in Bellevue, Washington, received 35 percent to 40 percent of the total amount charged to consumers and earned hundreds of millions of dollars from the charges, according to the FTC.
The Federal Communications Commission in an e-mailed statement said it also is investigating complaints about unauthorized billing by T-Mobile, and is coordinating its probe with the FTC.
The lawsuit, filed in federal court in Seattle, seeks to recover refunds for consumers for unauthorized charges. Rich didn’t specify how much the agency is seeking except that it could be “many millions.”
The case is Federal Trade Commission v. T-Mobile USA Inc., 14-00967, U.S. District Court for the Western District of Washington (Seattle).
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