T-Mobile USA agreed to pay $90 million to resolve federal and state claims that it charged consumers for extra services without authorization, a practice known as “cramming” that has become a target of regulators, the New York attorney general said.
The fourth-largest U.S. wireless carrier, a unit of Deutsche Telekom AG (DTE), was accused by the U.S. and all 50 states of tacking on third-party charges not requested by customers, such as $9.99-per-month premium text message subscriptions for horoscopes, celebrity gossip and sports scores.
In October, AT&T Inc. (T) agreed to pay $105 million to resolve similar allegations. U.S. officials said earlier this week that regulators were planning to seek an equal penalty from Sprint Corp.
As part of the deal revealed today, Bellevue, Washington-based T-Mobile must pay $67.5 million in refunds to consumers, $18 million to states and $4.5 million to the U.S. Treasury, New York Attorney General Eric Schneiderman said.
“When customers are billed for services they did not request, it picks the pockets of hard-working New Yorkers,” Schneiderman said. Of the money going to states, more than $500,000 will go to New York.
The U.S. Federal Trade Commission sued T-Mobile in July and alleged that it billed consumers for the unrequested services until at least December 2013, making hundreds of millions of dollars from its cut of the extra fees. Rather than being clearly broken out, the third-party charges were lumped under the generic term “usage charges” on customers’ bills, according to the agency’s complaint filed in federal court in Seattle.
The case is Federal Trade Commission v. T-Mobile USA Inc., 14-00967, U.S. District Court Western District of Washington (Seattle)
To contact the reporter on this story: Christie Smythe in Brooklyn at csmythe1@bloomberg.net
To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Joe Schneider, Andrew Dunn