Fed. Trade Commission sues T-Mobile for 'cramming' clients with bogus charges

By Diane Bartz

WASHINGTON (Reuters) - U.S. authorities filed a complaint against T-Mobile USA on Tuesday, accusing the wireless provider of adding millions of dollars of unauthorized charges onto customers' bills, a practice known as "cramming."

The charges were for subscriptions for services like horoscopes or celebrity gossip delivered by text message, which often cost $9.99 a month. T-Mobile USA received 35 to 40 percent of the amount charged, the Federal Trade Commission said in its complaint.

In many cases, customers never authorized the charges but were signed up without their knowledge, the commission said.

Separately, the Federal Communications Commission also announced it was investigating T-Mobile USA for cramming.

The FTC asked the court to order T-Mobile USA, the fourth-largest U.S. mobile phone provider by number of customers, to stop mobile cramming, to refund customers and to give up any revenues from the practice.

The agency has previously gone after the smaller companies that provide the flirting tips and other services delivered by text but this is its first action against a wireless carrier for cramming.

The FTC also alleged that T-Mobile USA was refunding to up 40 percent of some of the charges in a given month, which the agency said should have been a signal to the wireless company that the charges were fraudulent.

"The FTC’s goal is to ensure that T-Mobile repays all its customers for these crammed charges," FTC Chairwoman Edith Ramirez said in a statement.

"There were oodles of complaints," said Jessica Rich, director of the FTC's Bureau of Consumer Protection. She said the agency held settlement talks on the issue with T-Mobile but was unable to reach an agreement.

Despite the lawsuit, the practice should be coming to an end based on a pact that T-Mobile USA, Verizon, AT&T Mobility and Sprint, under pressure from 45 state attorneys general, agreed to in November to stop billing customers for third-party services.

The FTC also alleged that T-Mobile USA was deceptive in how it billed customers, putting the crammed charges under a total for "use charges" and "premium services" but never spelling out that a portion of the charge is for third-party charges.

Further, T-Mobile USA frequently balked at providing refunds, often urging customers to take their complaint to the vendor, the FTC said.

T-Mobile USA did not respond to requests for comment. The company announced a program on June 10 that reaches out to customers charged for these "premium" services to tell them how to request a refund if the charges were not authorized.

The complaint was filed in the U.S. District Court for the Western District of Washington.

(Reporting by Diane Bartz, additional reporting by Marina Lopes, editing by Ros Krasny, Jim Loney and Eric Beech)

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