The hiding of illicit charges in byzantine billing documents has forced T-Mobile to enter into a $90 million settlement with the US government.
The Federal Trade Commission announced Friday that the mobile phone service provider, which has labored to stake out a consumer-friendly iconoclast image, agreed to pay the fine–the majority of which is slated to finance customer refunds.
T-Mobile’s illegal practice, which is known as “cramming,” led to customers paying millions of dollars in fees for ringtones, wallpaper, horoscope texts, flirting tips and celebrity gossip that they never purchased.
Included in the settlement are fines to all 50 states’ attorneys general and the head prosecutor of Washington, DC worth a total $18 million and a penalty to the Federal Communications Commission worth $4.5 million.
The accord also requires T-Mobile to reach out to ripped-off customers, and forces it to pay $90 million to the FTC if it doesn’t cough up at least that amount in fines and refunds. Additionally, it requires the company to comply with regulations on consumer awareness and agency over third-party fees.
“The FTC’s complaint against T-Mobile noted that in many instances information about the third-party charges crammed on to customers’ bills was buried deep in phone bills that totaled more than 50 pages in length,” the federal agency noted in a press release.
Federal regulators filed litigation against the company last summer, accusing it of cramming after certain charges were being refunded at monthly rates of up to 40 percent–“an obvious sign to T-Mobile that the charges were never authorized by its customers,” the FTC stated. It said that the contested monthly fees were usually worth about $9.99.
The settlement should come as something of an embarrassment to T-Mobile, given its business model and marketing strategy. At a press conference last year, CEO John Legere, set out to brand the company as a sort-of populist institution.
“We’re going to redefine a stupid, broken, arrogant industry,” he said
