T-Mobile ignored fraudulent charges being placed on its customers phone bills for years and made hundreds of millions of dollars from it, the Federal Trade Commission alleged Tuesday.
However, T-Mobile called the FTC suit "unfounded and without merit" and a "sensationalized legal action."
The "cramming" involved third parties placing charges on T-Mobile phone bills for purported premium SMS subscriptions that, in many cases, were bogus or were never authorized by customers, alleged the FTC in a complaint filed Tuesday.
Regulators are seeking refunds for scammed customers.
“It’s wrong for a company like T-Mobile to profit from scams against its customers when there were clear warning signs the charges it was imposing were fraudulent,” said FTC Chairwoman Edith Ramirez.
The FTC figures T-Mobile received 35 percent to 40 percent of the total amount charged for content such as flirting tips, horoscope information or celebrity gossip that typically cost $9.99 per month. According to the FTC’s complaint, T-Mobile in some cases continued to bill its customers for these services offered by scammers years after becoming aware of signs that the charges were fraudulent.
T-Mobile, however, said it has stopped billing for premium SMS services late last year -- as did other major carriers -- and "launched a proactive program to provide full refunds for any customer that feels that they were charged for something they did not want."
"T-Mobile is fighting harder than any of the carriers to change the way the wireless industry operates and 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," T-Mobile CEO John Legere said in a statement.
Cramming charges are insidious, escaping the attention of consumers because the amounts are often small, $2 to $10 per month, and are buried among dozens of line items on a phone bill. Charges often have vague and innocuous names, such as "premium services."
Cramming has been a big problem in Illinois.
A 2012 Illinois law bans most third-party charges from landline phone bills, but it did not address wireless phone lines. They are trickier because many users routinely make purchases with their mobile phones, experts say. It's more difficult to create legislation that distinguishes between fraudulent charges and legitimate ones, such as text-message donations to the Red Cross.
Two years ago, Chicago-based Citizens Utility Board found the number of fraudulent third-party charges on Illinois cellphone bills nearly doubled during the year, with more than half of all such fees qualifying as cramming.