T-Mobile USA knowingly made hundreds of millions of dollars off its customers in potentially bogus charges, a U.S. government regulator alleged Tuesday in a complaint likely to mar the reputation of a household name in wireless communications.
In its complaint filed in a federal court in Seattle, the Federal Trade Commission claimed that T-Mobile billed consumers for subscriptions to premium text services such as $10-per-month horoscopes that were never authorized by the account holder. The FTC alleges that T-Mobile collected as much as 40 percent of the charges, even after being alerted by other customers that the subscriptions were scams.
"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 Chair Edith Ramirez in a statement. "The FTC's goal is to ensure that T-Mobile repays all its customers for these crammed charges."
The Federal Communications Commission has launched a separate inquiry into T-Mobile's billing practices, which could result in fines if it finds any wrongdoing.
The practice is often referred to as "cramming": businesses stuff a customer's bill with bogus charges associated with a third party. In this case, the FTC says T-Mobile should have realized that many of these premium text services were scams because of the high rate of customer complaints. In some cases, the FTC says, as many as 40 percent of customers demanded refunds in a single month on certain services.
The FTC said one way for consumers to try to prevent fraudulent charges is to ask their providers to block all third-party businesses from providing services on their phones.
T-Mobile did not immediately respond to a request for comment. T-Mobile US, Inc., is a publicly traded company. According to its website, Deutsche Telekom AG maintains a 67 percent ownership in the company's common stock.
Sprint Corp., the third-largest cellphone carrier, is in talks to buy T-Mobile US Inc., according to published reports. Analysts believe such a link-up would face stiff opposition from the same regulators who blocked AT&T from buying T-Mobile in 2011.
T-Mobile's stock fell 10 cents to $33.52 in afternoon trading.