Bellevue-based T-Mobile has agreed to pay at least $90 million to settle an investigation into allegations that the company billed customers millions of dollars in unauthorized third-party subscriptions and premium text-messaging services — a practice known as cramming.
Under the agreement, T-Mobile will pay at least $67.5 million in restitution to customers, including an estimated 230,754 Washington customers. If consumer claims exceed that amount, T-Mobile will be responsible for paying all of them.
“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,” Federal Trade Commission chairwoman Edith Ramirez said in a statement issued Friday.
“Consumers should be able to trust that their mobile-phone bills reflect the charges they authorized and nothing more.”
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In addition to the full refunds, T-Mobile will have to pay $18 million in fines and penalties to the attorneys general of all 50 states and the District of Columbia, and $4.5 million to the Federal Communications Commission (FCC).
The Federal Trade Commission (FTC) filed a lawsuit against T-Mobile in July, alleging the company placed millions of dollars in unwanted third-party charges on its customers’ mobile-phone bills, receiving 35 to 40 percent of every charge they placed. The charges were for services like horoscopes, love tips and celebrity gossip, for which T-Mobile typically billed consumers $9.99 per month.
T-Mobile, along with the three top wireless carriers — Verizon, AT&T and Sprint — said it stopped billing for these services in late 2013. This year, T-Mobile also launched a comprehensive refund program. In October, the company reported it had set $53 million in preparation for the settlement.
After the FTC filed its lawsuit, T-Mobile CEO John Legere said in a statement that it was “unfounded and without merit,” noting the efforts his company had already implemented a refund program.
T-Mobile customers are able to request a refund at www.t-mobilerefund.com.
T-Mobile did not immediately respond to requests for comment about the settlement.
Friday’s agreement requires T-Mobile to stay out of the premium text-messaging services business, which law-enforcement agencies believe represents the majority of cramming problems. The company must also contact all of its crammed customers — current and former — to inform them of the refund program and claims process.
Additionally, T-Mobile must obtain “express consent” before billing for third-party charges and present third-party charges in a dedicated section of the phone bill, according to the FTC.
Since January, the federal government has taken action against carriers for alleged cramming and similar violations. In October AT&T agreed to pay $105 million for cramming.
Earlier this week, the Consumer Financial Protection Bureau, working with the FCC, filed a lawsuit against Sprint for cramming.
T-Mobile shares closed up 54 cents, or 2.1 percent, at $26.45.
Coral Garnick: 206-464-2422 or email@example.com