FTC Hits T-Mobile with $90 Million Cramming Fine

Wireless giant T-Mobile has agreed to pay more than $90 million as punishment for placing unwanted third-party charges on phones, also known as "mobile cramming," the Federal Trade Commission said Friday. If the announced agreement is approved by a U.S. District Court, it would resolve an FTC lawsuit filed in July that accused T-Mobile of billing customers for unwanted charges, including horoscope, love tip and celebrity gossip services.

T-Mobile received 35 percent to 40 percent of each charge, the FTC said in its lawsuit, and the company reportedly made it excessively difficult for consumers to get refunds.

In resolving the lawsuit, Bellevue, Washington-based T-Mobile must refund $67.5 million to consumers, and pay fines totaling $18 million to attorneys general in several states, as well as $4.5 million to the Federal Communications Commission, according to the FTC.

"Mobile cramming is an issue that has affected millions of American consumers, and I'm pleased that this settlement will put money back in the hands of affected T-Mobile customers," said FTC Chairwoman Edith Ramirez in a statement.

Pickpockets?

The T-Mobile settlement is the most recent in a series broader crackdowns on wireless carriers adding unauthorized charges to customers' bills. In October, AT&T agreed to pay $105 million to settle cramming charges. And this week, Sprint was hit with a lawsuit filed by the Consumer Financial Protection Bureau over allowing similar charges.

"When customers are billed for services they did not request it picks the pockets of hard-working New Yorkers," New York Attorney General Eric Schneiderman told Bloomberg News. Of the T-Mobile money going to states, more than $500,000 would go to New York.

Not Much to Say

T-Mobile executives were closed-mouthed after the announcement Friday, but not so when the FTC first filed its complaint. At that time T-Mobile CEO John Legere called the complaint unfounded and without merit.

"In fact, T-Mobile stopped billing for these Premium SMS services last year and launched a proactive program to provide full refunds for any customer that feels that they were charged for something they did not want," Legere said. "We believe those providers should be held accountable and that the FTC's lawsuit seeking to hold T-Mobile responsible for their acts is not only factually and legally unfounded but also misdirected."

T-Mobile has worked recently to reverse years of subscriber losses. Despite gains in postpaid subscribers last year and in the first quarter of 2014, T-Mobile lost $151 million in the first three months of the year.

The FTC suit did not enumerate the number of customers affected by the alleged overcharges or the total value of the charges. The FTC said at the time that the commission had been in settlement talks with T-Mobile before the suit was announced but did not reach an agreement.