T-Mobile to Pay $90M for Cramming Crimes

T-Mobile has agreed to pay up at least $90 million to settle a lawsuit the FTC filed against it for cramming, or allowing third parties to charge its customers for unwanted services -- a practice for which many of the major operators have come under fire.

T-Mobile US Inc. said on Friday it would pay back a minimum of $67.5 million to customers who claim they've been overcharged, $18 million to the 50 US states and DC and $4.5 million to the US Treasury. AT&T Inc. (NYSE: T) similarly paid out $105 million in cramming charges in October, and Sprint Corp. (NYSE: S) is in the middle of a lawsuit now.

The Federal Communications Commission (FCC) said in its filing that T-Mobile included charges on its bills for Premium Short Message Services (PSMS) like ringtones and wallpapers that were not authorized by the customer. When questioned, refunds were not always offered or were only partially paid back, and the FCC alleges that they were not properly explained either.

The Federal Trade Commission originally filed suit against T-Mobile in July, and CEO John Legere dismissed the charges as meritless. He also said the carrier would launch a program to pay everyone back. He was, however, a bit quieter today (at least on Twitter) as the FTC and FCC will require him to do much more than that.

In addition to the payments, the FCC has also prohibited T-Mobile from charging customers for third-party PSMS; required it to develop a system to verify third-party charges, provide separate purchase confirmations for them and clearly explain them on bills; block the charges when requested; appoint a compliance offer to oversee this; and implement a training program to ensure its customer service reps can handle complaints over the charges.

— Sarah Reedy, Senior Editor, Light Reading