FTC Cracks Down On T-Mobile For Massive Bogus Charges And Fee Scam

from the whoops dept

So you know all that stuff about how T-Mobile has been trying to position itself as the "uncarrier" that actually treats customers right instead of bilking them at every opportunity? Yeah, that would be a lot more convincing if the FTC didn't just come down on the company for bilking millions in bogus charges from people. It appears that T-Mobile was engaged in a form of cramming that signed subscribers up to $9.99/month "subscriptions" to content they'd never asked for:
In a complaint filed today, the Federal Trade Commission is charging mobile phone service provider T-Mobile USA, Inc., with making hundreds of millions of dollars by placing charges on mobile phone bills for purported “premium” SMS subscriptions that, in many cases, were bogus charges that were never authorized by its customers.

The FTC alleges that T-Mobile received anywhere from 35 to 40 percent of the total amount charged to consumers for subscriptions 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.
Not only were the frequent complaints and cancellations of the service a clear sign that T-Mobile should have known these charges were fraudulent, but T-Mobile seemed to go out of its way to disguise the nature of these charges to try to minimize the complaints:
The complaint against T-Mobile alleges that the company’s billing practices made it difficult for consumers to detect that they were being charged, much less by whom. When consumers viewed a summary of their T-Mobile bill online, according to the complaint, it did not show consumers that they were being charged by a third party, or that the charge was part of a recurring subscription. The heading under which the charges would be listed, “Premium Services,” could only be seen after clicking on a separate heading called “Use Charges.” Even after clicking, though, consumers still could not see the individual charges.

The complaint also alleges that T-Mobile’s full phone bills, which can be longer than 50 pages, made it nearly impossible for consumers to find and understand third-party subscription charges. After looking past a “Summary” section as well as an “Account Service Detail” section, both of which described “Usage Charges” but did not itemize those charges, a consumer might then reach the section labeled “Premium Services,” where the crammed items would be listed.

According to the complaint, the information would be listed there in an abbreviated form, such as “8888906150BrnStorm23918,” that did not explain that the charge was for a recurring third-party subscription supposedly authorized by the consumer. In addition, the complaint notes that consumers who use pre-paid calling plans do not receive monthly bills, and as a result the subscription fee was debited from their pre-paid account without their knowledge.
Here's the example the FTC provided showing how T-Mobile hid these bogus charges:
By the way, nice touch by the FTC to use T-Mobile's trademarked magenta color in making that graphic!

And, of course, the story gets worse. Even if people figured out what the hell was going on, and finally got someone on the phone at T-Mobile customer service to sort it out, the company often failed to provide them with full refunds.
When consumers were able to determine they were being charged for services they hadn’t ordered, the complaint alleges that T-Mobile in many cases failed to provide consumers with full refunds. Indeed, the FTC charged that T-Mobile refused refunds to some customers, offering only partial refunds of two months’ worth of the charges to others, and in other cases instructed consumers to seek refunds directly from the scammers – without providing accurate contact information to do so.

The complaint also notes that in some cases, T-Mobile claimed that consumers had authorized the charges despite having no proof of consumers doing so.
T-Mobile has done a bunch of consumer friendly things in the recent past, but these sort of practices suggest that the traditional soul of phone companies, always looking to squeeze extra fees out of users is alive and well within the company.

Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Anonymous Coward, Jul 1st, 2014 @ 9:02pm

    I don't know about other teams but I worked there for three years and our team was taught to credit the charges, no questions asked, and then offer to block those types of services from the users lines. But I left in 2008 so they may have changed policy after that.

     

    reply to this | link to this | view in thread ]

  2.  
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    Anonymous Coward, Jul 1st, 2014 @ 9:07pm

    "T-Mobile has done a bunch of consumer friendly things in the recent past"

    This is absolute proof that you are nothing but a T-Mobile shill!

    /sarc

    These types of stories are so crazy they almost give me the impression that they were preplanned by the govt and T-Mobile to give us the appearance that the government is protecting consumers.

     

    reply to this | link to this | view in thread ]

  3.  
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    missingxtension, Jul 1st, 2014 @ 9:11pm

    congrats

    Hey you guys made it on Google news....

     

    reply to this | link to this | view in thread ]

  4.  
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    James Burkhardt (profile), Jul 1st, 2014 @ 9:39pm

    Surprising that they are going after tmobile when at&t and verison also do this shit and are bigger. Almost like they are targeting the smaller disruptive company rather then the bigger incumbants for some reason.

    Moreover shouldn't the FTC be going after the third parties signing people up for these services rather than the the secondary liability target?

     

    reply to this | link to this | view in thread ]

  5.  
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    Anonymous Coward, Jul 1st, 2014 @ 10:20pm

    Re:

    Moreover shouldn't the FTC be going after the third parties signing people up for these services rather than the the secondary liability target?


    Not an unfair call, but note from the article (emphasis added):
    The FTC alleges that T-Mobile received anywhere from 35 to 40 percent of the total amount charged to consumers for subscriptions... 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.

    It sounds from the claim that T-Mobile is complicit with the scammers, making them directly liable - indeed, earlier in the article it mentions "charging [T-Mobile] with making hundreds of millions of dollars", meaning T-Mobile is directly profiting from this.

    There's nothing in the article that mentions whether or not anyone is also going after the scam services directly.

     

    reply to this | link to this | view in thread ]

  6.  
    identicon
    Donnicton, Jul 1st, 2014 @ 10:44pm

    Re:

    I've had a family member get caught by one of these in 2010 or 2011 or so. What's worse is that it was one of those damn opt-out ones that you specifically had to reply to to get out of, and they had just deleted it as spam as most people would be conditioned to do. I called T-Mobile on their behalf and they did offer me credit for the charges and offered to block five digit text numbers entirely.

    So it's pretty easy to get T-Mobile to remove them, but you have to specifically go out of your way to identify them and contact T-Mobile about it.

    It's a fairly obtuse process (though I've heard that AT&T/Verizon will rake you through the coals before they'll willingly remove them or credit you), but it's that way because the carriers get a cut of the cramming fees, so they'd rather just let them happen as long as nobody is looking too closely and rake in some "free" money.

     

    reply to this | link to this | view in thread ]

  7.  
    identicon
    Anonymous Coward, Jul 1st, 2014 @ 10:50pm

    Face it, there are very few telecommunications co. that people -like-

    In my area, there is exactly 1 internet provider that folks like, Grande Communications, but the have very small coverage areas. Great speeds, very reasonable prices, and blow your socks off customer service.

    If you've never heard of NPS(R), or Net Promoter Score,

    http://www.netpromoter.com/why-net-promoter/know/

    it's a way to see how your customers view your business. In open markets, this is of vital importance. If your market consists of almost total regulatory lock in and government monopolies, then it's quite unimportant. Markets like, say, Cell phone, telephone, internet, cable, or satellite TV.

    I've often thought that the telco and cable/satellite business should get a message from the FCC and FTC to the effect of:

    "OK boys, the gloves are OFF. Get your NPS(R) scores up to at least 7 within two years. If you fail at that, then all the restrictions, all the subsidies, all the laws that make you gate keepers go away. Get a score below 5, and the C level executives will be barred for life from holding a management position."

    What I'd really like is for the government to remove ALL the barriers to entry for competition RIGHT NOW. One thing they could do that wouldn't be very difficult at all is make a rule that any frequency spectrum held by a telco that did not have at least 40% utilization over 2 years would go back to auction, and the previous owner would be forever banned from bidding on it again. Some telcos, in my opinion (I'm looking at YOU AT&T) hold vast swaths of RF spectrum with out an ounce of intention of ever putting it into service for customers. It's held simply to keep ILEC's and CLEC's from obtaining it and competing.

     

    reply to this | link to this | view in thread ]

  8.  
    identicon
    Anonymous Coward, Jul 1st, 2014 @ 11:07pm

    Re: Re:

    In the Eu, you simply reply with 'STOP ALL' (no quotation marks) tot hat number and a company is legally obliged to stop them.

     

    reply to this | link to this | view in thread ]

  9.  
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    Anonymous Coward, Jul 1st, 2014 @ 11:49pm

    Re:

    I don't think these things are uncommon at all. They probably didn't bother specifying what it was charged for. Not because it is in their interest, but because it is easier. Don't assume sinister intend when incompetence is possible.

     

    reply to this | link to this | view in thread ]

  10.  
    identicon
    Anonymous Coward, Jul 1st, 2014 @ 11:49pm

    Re: Re: Re:

    Unless you're T-Mobile/EE/Orange where you get a return text saying "Sorry, this opt-out service is currently unavailable." Grrr

     

    reply to this | link to this | view in thread ]

  11.  
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    Joma (profile), Jul 2nd, 2014 @ 12:10am

    I dont think it is unsulual

     

    reply to this | link to this | view in thread ]

  12.  
    identicon
    Anonymous Coward, Jul 2nd, 2014 @ 3:14am

    I've heard of these SMS scams. Usually they come from installing malware apps off the Google Play store. For example, downloading a 'flash light' app that ends up sending SMS text messages from your phone to collect SMS numbers.

     

    reply to this | link to this | view in thread ]

  13.  
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    Zerb, Jul 2nd, 2014 @ 5:40am

    nice reportage...not

    It is well known that ALL the carriers do this (I've personally experienced having to deal with "slammed" subscriptions on both Sprint and AT&T). They make a ton of money off these situations so it is no surprise they all handle complaints about them slowly and begrudgingly, if at all.

    A good report would have investigated why T-Mobile is being singled out.

     

    reply to this | link to this | view in thread ]

  14.  
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    Josh in CharlotteNC (profile), Jul 2nd, 2014 @ 6:02am

    Re:

    What the FTC is going after here are not SMS scams and doesn't have anything to do with SMS messages. It is specifically called "cramming" - and basically allows someone to add a charge to your phone bill by simply knowing your phone number.

     

    reply to this | link to this | view in thread ]

  15.  
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    art guerrilla (profile), Jul 2nd, 2014 @ 7:10am

    Re: Face it, there are very few telecommunications co. that people -like-

    EXACTLY why telecom companies SHOULD be a state-provided service (like insurance)...
    hell, i'm about to go full-bore commie in reaction to the unrestrained capitalist imperialism shitty system 'we' have now...

     

    reply to this | link to this | view in thread ]

  16.  
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    Un (profile), Jul 2nd, 2014 @ 7:52am

    Re: nice reportage...not

    I think the FTC were careful in their claim. They understand that T-Mobile are required by law to operate an open bill onto which third party telecom service providers can latch when the subscriber takes an action to enroll. They specifically state that T-Mobile's bills made it very difficult for consumers to realize they were crammed as a result of some action they never expected would cause the cram.

    In our telecom regulations, the bill is a conduit for a wide array of sewage. All the telcos open up and encourage a third party market. That market isn't vetted to prove that the consumer is making a highly conscious decision.

    The telcos all know there are third party providers that cram charges with little to no consumer awareness, but they aren't required or ABLE to categorically remove a service provider because somebody may actually want those trivia SMS messages.

    So I'm not going to leap to telcos are innocent, because service provider vetting is too weak to protect morons in a hurry from deception or from outright malware silent enrollment, but ultimately it's the service providers that are offering a somewhat desirable service that appears to be free at the moment only to appear as an indecipherable abbreviation buried several clicks deep in the online bill.

    T-Mo should make access to attached services easy to find and easy to understand. On my bill, with call detail collapsed, it takes one click to see crams. That visibility causes a lot of call center traffic. T-Mo can be held specifically accountable because they bury crams as a way to cut call center costs and still meet tariffed call handling requirements.

    The FTC aren't saying crams only exist on T-Mo.

     

    reply to this | link to this | view in thread ]

  17.  
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    Stuart (profile), Jul 2nd, 2014 @ 8:09am

    Re:

    Of course the FTC should go after the bigger companies and the scammers themselves.
    But T-Mobile was not busted for signing the people up. They were fined for deliberately making the charges difficult to find and remove. Thereby making them more money.
    They were helping to enable the scammers for their own profit. This is not a good thing and should be fined at a much higher level. Take all the money they made off this practice and ad 20%. That should be the fine.

     

    reply to this | link to this | view in thread ]

  18.  
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    Vanye (profile), Jul 2nd, 2014 @ 8:28am

    Addressed already

    This has been addressed by T-Mobile already. As of November 2013, they had a program in place:
    https://t-mobile.jive-mobile.com/#jive-document?content=%2Fapi%2Fcore%2Fv2%2Fdocuments%2F9863


    I found that link via the following article:
    http://techcrunch.com/2014/07/01/ftc-accuses-t-mobile-of-allowing-shady-scams-to-sneak-onto- your-phone-bill/

     

    reply to this | link to this | view in thread ]

  19.  
    identicon
    Kit Triforce, Jul 2nd, 2014 @ 9:19am

    Something doesn't seem right here

    So, from various reviews on this and other sites, and from personal experience it appears that T-Mobile acts better than AT&T or Verizon. Specifically, they do a better job at helping the customer, offer compensation (since Nov 13, 8 months before this report), and yet nothing has been said about their competition. On top of that, the FTC graphic seems to me, by using the T-Mobile magenta and the more artistic fonts, to be mocking the company.

    This sounds more like the attack of a competitor than the actions of a governing body. I think this bears greater investigation; someone other than the FTC seems to have pulled strings to get this (and only just this) complaint out.

     

    reply to this | link to this | view in thread ]

  20.  
    identicon
    Anonymous Coward, Jul 2nd, 2014 @ 9:55am

    Oh, you would like a refund? if you would please just give me your bank account information, address, social security number, mothers maiden name, and city of birth please, i'll be happy to get that to you.

     

    reply to this | link to this | view in thread ]

  21.  
    identicon
    TestPilotDummy, Jul 2nd, 2014 @ 10:23am

    (cough AT&T)

    My wonderful voice mail service I never signed up for.

    Similar third party fraud...

    Finger Pointing (or is it painting?) with the enemy.

    Phone tag.

    Promises.

     

    reply to this | link to this | view in thread ]

  22.  
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    John85851 (profile), Jul 2nd, 2014 @ 12:28pm

    All about the money

    As always, it's all about the money.

    I'm sure these companies have meetings where the risk-assessment department decides that it's better to scam people. After all, they know that X% of people will complain, leaving 100-X% still paying the bogus fees.
    For example, if 10 million people are charged $10 a month, that's $100 million. If 50% of those people complain, maybe the company can talk some people out of a refund. That leaves 5 or 6 million people still paying the $10 fee... and like any fee, the company brings in money without providing a product or service.
    $50 to $60 million a month is pretty good for not doing anything.

    Is this right? Of course not, but they have shareholders to answer to.

     

    reply to this | link to this | view in thread ]

  23.  
    identicon
    Anonymous Coward, Jul 2nd, 2014 @ 1:56pm

    Here's a YouTube video showing how the "cramming" text message scam works. The video author tracked down one of these scammers.

    The scammers name is Jason Hope, from Arizona. He allegedly has over 20 LLC companies running these texting scams and is raking in billions of dollars a year and throwing million dollar parties in his house that's larger than Bill Gates' house.

    http://www.youtube.com/embed/F9MQAfh-bCE

     

    reply to this | link to this | view in thread ]

  24.  
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    steell (profile), Jul 2nd, 2014 @ 2:52pm

    Maybe you should post the reply by T-Mobile?

     

    reply to this | link to this | view in thread ]

  25.  
    identicon
    David, Jul 2nd, 2014 @ 7:15pm

    Sounds like revenge

    This just screams AT&T and verizon using the FTC to lash out at a competitor who might not have as many friends in high places.

     

    reply to this | link to this | view in thread ]

  26.  
    icon
    Coyne Tibbets (profile), Jul 3rd, 2014 @ 8:23pm

    Merger interference

    After thinking about this for a while, I suspect this is merger interference.

    After all, AT&T and Verizon have done and do the same, and many similar "scams" have also been done on credit cards. All have a common recurrent theme: You somehow get conned into agreeing to the subscription...but good luck getting out of it.

    It is the timing that strikes me as suspicious here: T-Mobile and Sprint are talking about a merger...and then here is this. I suspect it is a purely political move, triggered by AT&T or Verizon, to sink the merger.

     

    reply to this | link to this | view in thread ]

  27.  
    identicon
    Anonymous Coward, Jul 9th, 2014 @ 8:00pm

    Making someone opt-in to purchases, without receiving a reply, is definitely a scam.

     

    reply to this | link to this | view in thread ]


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