T-Mobile clashes with US trade body over alleged SMS scam

T-Mobile clashes with US trade body over alleged SMS scam

02 JUL 2014

John Legere (pictured), the no-holds barred CEO of T-Mobile USA, hit back at the Federal Trade Commission (FTC) for filing a lawsuit against the operator about a premium SMS service that allegedly swindled customers out of “hundreds of millions of dollars”.

Legere called FTC’s move “sensationalised legal action”, pointing out that T-Mobile USA scrapped the service last year and was already in the process of reimbursing out-of-pocket customers.

“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,” said Legere in a statement.

For Legere, the “bad actors” are irresponsible third-party providers and scammers.

It’s not a view shared by FTC, which alleges T-Mobile USA was complicit in a scam to deceive customers.

FTC claims T-Mobile USA typically charged customers $9.99 per month for premium text messages that they never even asked for – such as flirting and horoscope information – and took a 35-40 per cent cut.

Although the text alert services were provided by third-party providers, FTC claims T-Mobile USA did not react quickly enough when it could see more and more customers were asking for refunds (which should have given a clear sign, said FTC, that these services were unauthorised).

The FTC lawsuit states that internal company documents show T-Mobile had received a high number of consumer complaints at least as early as 2012.

Neither did T-Mobile USA make it clear on customers’ bills, alleges FTC, that the $9.99 fee may well be related to so-called “cramming” (when charges are made without customer authorisation).

“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’s goal is to ensure that T-Mobile repays all its customers for these crammed charges.”

As well as opaque bills, FTC alleges that when consumers were able to determine they were being charged for services they hadn’t ordered, T-Mobile, in many cases, failed to provide consumers with full refunds. In other cases, said FTC, T-Mobile instructed consumers to seek refunds directly from the scammers but without providing accurate contact information to do so.

FTC is coordinating with FCC, the US telecoms regulator, which has launched its own investigation into the matter. There is some speculation that should FCC review a merger between T-Mobile USA and Sprint, this controversy would be a black mark.


Ken Wieland

Ken has been part of the MWC Mobile World Daily editorial team for the last three years, and is now contributing regularly to Mobile World Live. He has been a telecoms journalist for over 15 years, which includes eight...More

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