WBOB Original Reads

$90 Million “Cramming” Settlement Reached with T-Mobile

12/21/2014

Rhode Island Attorney General Peter Kilmartin – along with the Attorneys General of the other 49 States and the District of Columbia, the Federal Trade Commission, and the Federal Communications Commission (FCC) - reached settlements with T-Mobile USA, Inc., that includes at least $90 million in payments and that resolve allegations that T-Mobile placed charges for third-party services on consumers’ mobile telephone bills that were not authorized by the consumer, a practice known as “mobile cramming.”

Consumers who have been “crammed” often complain about charges, typically $9.99 per month, for “premium” text message subscription services (also known as “PSMS” subscriptions) such as horoscopes, trivia, and sports scores, that the consumers have never heard of or requested. The Attorneys General and federal regulators allege that “cramming” occurred when T-Mobile placed charges from third parties on consumers’ mobile telephone bills without the consumers’ knowledge or consent.

Under the terms of the settlements, T-Mobile must provide each victim who files a claim under its Premium SMS Refund Program an opportunity for a full refund. The settlement terms require that T-Mobile pay at least $90 million; of this sum, at least $67.5 million must be paid to consumers - a portion of which may be paid by forgiving debts consumers may owe T-Mobile.

T-Mobile will also pay $18 million to the Attorneys General and $4.5 million to the FCC. The State of Rhode Island will receive approximately $198,000 from the payment made to the Attorneys General.

T-Mobile is the second mobile telephone provider to enter into a nation-wide settlement to resolve allegations regarding cramming; Attorney General Kilmartin announced a similar, $105 million settlement with AT&T in October of this year. T-Mobile and AT&T were among the four major mobile carriers - in addition to Verizon and Sprint - that announced they would cease billing customers for commercial PSMS in the fall of 2013.

“The practice of cramming by mobile carriers relied on consumers not checking their monthly bills closely for hidden fees and charges. Companies that work hard to attract customers, especially in the highly competitive wireless communication industry, should be more mindful of how they treat the customers,” said Attorney General Kilmartin.

Consumers can submit claims under the Program by visiting http://www.t-mobilerefund.com. On that website, consumers can submit a claim, find information about refund eligibility and how to obtain a refund, and can request a free account summary that details PSMS purchases on their accounts. Consumers who have questions about the Program can visit the Program website or call the Refund Administrator at (855) 382-6403.

The settlement requires T-Mobile to stay out of the commercial PSMS business—the platform to which law enforcement agencies attribute the lion’s share of the mobile cramming problem. T-Mobile must also take a number of steps to ensure that it only bills consumers for third-party charges that have been authorized, including the following:

T-Mobile must obtain consumers’ express consent before billing consumers for third-party charges, and must ensure that consumers are only charged for services if the consumer has been informed of all material terms and conditions of their payment;
T-Mobile must give consumers an opportunity to obtain a full refund or credit when they are billed for unauthorized third-party charges;
T-Mobile must inform its customers when they sign up for services that their mobile phone can be used to pay for third-party charges, and must inform consumers of how those third-party charges can be blocked if the consumer doesn’t want to use their phone as a payment method for third-party products; and
T-Mobile must present third-party charges in a dedicated section of consumers’ mobile phone bills, must clearly distinguish them from T-Mobile charges, and must include in that same section information about the consumers’ ability to block third-party charges.

This is the second settlement in three months that Kilmartin has announced with a mobile carrier over cramming. In October, Kilmartin announced a $105 million settlement with AT&T. Under the terms of that settlement, the State of Rhode Island received approximately $220,000 and refunds for AT&T customers.