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FTC: T-Mobile Will Pay At Least $90 Million to Settle Cramming Charge

The Obama Administration is clearly serious about cracking down on unauthorized charges on telecom bills.

The Federal Trade Commission Friday said that T-Mobile has agreed to pay at least $90 million to settle charges that it placed unwanted third-party charges on phone bills. That $90 million is a minimum. There is no cap, so it could wind up being more.

In addition to refunds to customers, T-Mobile will pay $18 million in fines and penalties to the attorney general in all 50 states and will inform customers of all charges, who will have to agree to them before they are levied.

“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,” FTC chairwoman Edith Ramirez said in a statement. “Consumers should be able to trust that their mobile phone bills reflect the charges they authorized and nothing more.”

The settlement resolves a suit filed by the FTC in July.

It has been a busy week for 'cramming' in D.C.

The Consumer Financial Protection Bureau, with an assist from the FCC, earlier this week filed suit against Sprint for illegally billing wireless customers for tens of millions of dollars in third-party charges that were never authorized. Sprint disputes the charges. In fact the company says it is a leader in combating them.

“Cell phone bills are already high enough without these unauthorized and often unwanted services,” said Maryland attorney general Doug Gansler. “T-Mobile has agreed to provide refunds for overcharged consumers and adopt strict guidelines to ensure consumers are only billed for products or services for which they knowingly agreed to pay an additional fee.”

"Cramming is a significant problem. For too long, millions of consumers have been scammed — billed for bogus charges on their phone bills for services they didn't request," said FCC chairman Tom Wheeler in response to the settlement. "This is unacceptable. Today's settlement is a win for consumers who have been victimized by cramming. It means compensation for T-Mobile customers who were fraudulently billed for third-party services that they did not want or authorize. And it goes one step further. Today's action will also help protect all of T-Mobile's customers from bogus third-party charges in the future."

T-Mobile did not have to admit any liability, but FCC Enforcement Bureau Chief Travis LeBlanc clearly had an opinion on that score and did not mince words. On a conference call with reporters about the settlement, he said T-Mobile profitted handsomely from the third-party cramming and was "in bed with the scammers." He also said the FCC will take aim at cramming wherever it appears, including cable and others.

Leblanc said that along with a $105 million settlement with AT&T in October, the FCC and its partners, the FTC, Consumer Financial Protection Bureau, state attorneys genearl--had put the carriers on notice that they will be held accountable.

He said industry self-regulation has failed to protect consumers and the FCC would revisit that regime.

LeBlanc spoke passionately and rapid fire as he took aim at carriers and what he said was bad conduct and scams. He said the point was not to make an example out of one company, which appeared to be the case since he talkied about AT&T as well, and signaled all carriers, and cable operators, and even broadcasters, were on notice.

He said the FCC has "zero tolerance" for billing practices that "cheat" consumers into charges they did not want or authorize.

LeBlanc that said the AT&T and T-Mobile settlements combined means about half of mobile subs now have protections from bogus charges.

The refund T-Mobile is estimated to have to privide is $65 million, but, since it is uncapped, could be north of $100 million, according to  Vermont Attorney General Bill Sorrell.