T-Mobile has agreed to pay at least $90 million in refunds to customers who were wrongfully billed for spam messages in an industry-wide practice known as cramming.
A statement by the Federal Trade Commission (FTC), which has filed a lawsuit against the Un-carrier in July alleging it of profiting "millions" of dollars from the practice, says T-Mobile has agreed to settle the case by paying full refunds to all customers who received unlawful charges for what carriers call premium SMS, mostly texts containing horoscopes, flirting tips and celebrity gossip, sometimes amounting to $9.99 a month.
If the refunds do not amount up to $90 million, T-Mobile must remit the balance to the FTC for the commission to "make additional regress, disgorgement or consumer informational remedies." Under the terms of the agreement, T-Mobile will also have to pay $18 million in fines to the state attorney generals and $4.5 million in penalties 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," says FTC Chairwoman Edith Ramirez. "Consumers should be able to trust that their mobile phone bills reflect the charges they authorized and nothing more."
T-Mobile is required to notify all customers eligible for refunds, including former customers who have switched to other carriers, and to inform them about the refund process in a "clear and conspicuous way." The Un-carrier will also need to require the express consent of customers before sending them premium SMS and educate them how to block third-party services if they wish not to receive any of them in the future.
In its lawsuit, the FTC accused T-Mobile of receiving a 35 to 40 percent cut of the revenue earned by its partner merchants in sending unwanted services to customers. The commission says T-Mobile had a refund rate of up to 40 percent for these third-party services, indicating that T-Mobile never asked for permission to charge for these services.
Moreover, the FTC says T-Mobile made it hard for customers to notice the charges because they were buried deep in the carrier's 50-page bills and often disguised by obscure labels that look something like this: "8888906150BrnStorm23918."
Earlier this year, T-Mobile CEO John Legere issued a statement following the complaint saying it was "unfounded and without merit" because T-Mobile stopped allowing third-party charges in 2013.
The FTC has also reached a similar settlement with AT&T to pay a total of $105 million in refunds and fines for the same practice. And just earlier this week, the Federal Communications Commission (FCC) announced that a partner consumer bureau called the Consumer Financial Protection Bureau has filed a lawsuit against Sprint also for cramming.
