FTC claims T-Mobile conned customers out of hundreds of millions of dollars

July 1, 2014, 8:14 PM UTC
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T-Mobile USA is in hot water, thanks to a complaint filed by the FTC on Tuesday alleging that the mobile phone company made hundreds of millions of dollars by billing customers for services they never authorized.

According to the complaint, T-Mobile billed some customers for content from third-parties like horoscopes and celebrity gossip — costing $9.99 a month — even though those customers never ordered such services.  After being made aware of the fraudulent charges, T-Mobile did nothing and continued to pocket commissions of up to 40%, according to the FTC.

“It’s wrong for a company like T-Mobile to profit from such charges when it’s clear those charges were fraudulent,” said FTC Consumer Protection Jessica Rich during a call on Tuesday with reporters.

T-Mobile CEO John Legere denied what he called the FTC’s “sensationalized legal action” in a strongly-worded blog post on the company’s Web site, arguing that T-Mobile stopped billing customers for these services in 2013 and offered refunds. “We believe those [third-party] providers should be held accountable, and the FTC’s lawsuit seeking to hold T-Mobile responsible for their acts is not only factually and legally unfounded, but also misdirected,” wrote Legere.

Phone companies billing customers for services from a third-party isn’t unusual. But when those charges are unauthorized, it’s known as “cramming.” The FTC claims T-Mobile began cramming customers as early as 2012, when it ignored an unusually high number of complaints from users seeking refunds.

Rich said T-Mobile has since stopped its cramming activities but hasn’t issues refunds to affected customers. And while the FTC previously attempted to reach a settlement with the phone company, those discussions led nowhere. With Tuesday’s complaint, the FTC now wants T-Mobile to refunds it users were allegedly bilked out of their money.  “This has translated into hundreds of millions of dollars for T-Mobile and harm to customers,” Rich said.

Note: This story was updated with additional information from T-Mobile.