FTC claims T-Mobile USA made millions from bogus charges

T-Mobile USA made hundreds of millions of dollars from "bogus charges" that customers never authorised, the US Federal Trade Commission claimed in a complaint filed on Tuesday.

The Federal Communications Commission is co-ordinating with the FTC and has launched its own investigation which could hurt the fourth-largest US mobile carrier if it comes up for merger review at the agency.

Japan's SoftBank, the owner of the third-largest mobile carrier in the US, Sprint, is in talks to acquire T-Mobile. The deal would need approval by the FCC and the justice department, which has already expressed doubts about such a tie-up.

The FTC has sued T-Mobile and is seeking a court order to prevent it from charging customers without their permission and to obtain refunds for consumers. The amount the FTC is seeking will be determined during the legal process, but would probably be in the hundreds of millions of dollars.

The FTC said T-Mobile imposed charges of $9.99 a month for premium text message subscriptions that included flirting tips, horoscope information or celebrity gossip, of which the carrier received 35 to 40 per cent.

John Legere, chief executive of T-Mobile, said the FTC was trying to hold the company responsible for the acts of third-party providers that sent the text messages, calling its "sensationalised legal action" misdirected and legally unfounded.

"T-Mobile stopped billing for these Premium SMS services last year and launched a proactive programme to provide full refunds for any customer that feels that they were charged for something they did not want," he said. "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."

The charges stemmed from services offered by other companies that used T-Mobile to receive customer payments in a process known as "third-party billing". In some cases, the FTC said, T-Mobile kept on charging customers even after it knew that they had not authorised the fees, a process known as cramming.

"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," FTC chairwoman Edith Ramirez said. "The FTC's goal is to ensure that T-Mobile repays all its customers for these crammed charges."

The FTC did not have information on how many customers had been affected but believes the practice goes back to 2009. T-Mobile received a high number of consumer complaints starting from at least 2012, and was charging customers for services where refunds reached up to 40 per cent of billings in one month, which the FTC said should have been an obvious sign that the charges were never authorised.

In November, AT&T, Sprint and T-Mobile announced agreements with 45 states to stop charging customers for premium text message services. T-Mobile and the FTC were in talks to try to settle the matter but could not reach an agreement. The FTC would not comment on whether it might file complaints against other carriers.

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