Senate blasts mobile carriers for profiting from phony fees

AT&T, Verizon, Sprint, and T-Mobile all allegedly "crammed" customers with third-party charges that cost hundreds of millions of dollars, Senate report says.

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CNET

The Senate has joined the Federal Trade Commission and Federal Communications Commission in chastising the four top US wireless carriers for skimming money from customers.

In a lengthy report (PDF) released by Senate Commerce Chairman Jay Rockefeller (D-W.Va.) on Wednesday, AT&T, Verizon, Sprint, and T-Mobile are accused of a practice known as "cramming," in which wireless carriers allow mystery fees to appear on consumers' phone bills without notification.

These mystery fees are typically fraudulent and unauthorized third-party charges, ranging from $1.99 to $19.99 a month, for things like ringtones or "premium" services, such as a daily horoscope. Users don't normally see these charges because they're buried deep within monthly phone bills.

The report calls cramming a "widespread" problem and says that "hundreds of millions of dollars" in unauthorized charges have likely racked up on users' monthly phone bills.

"Third-party billing on wireless phone bills has been a billion-dollar industry that has yielded tremendous revenues for carriers," reads the report. "AT&T, Sprint, T-Mobile, and Verizon generally retained 30 percent to 40 percent of each vendor charge placed."

The Senate report comes on the heels of the FTC filing a complaint against T-Mobile, alleging the carrier has made millions on fees from "premium" text messages that customers didn't request. The messages, often sent as a joke or flirting tips, can cost $9.99 a month, said the FTC.

T-Mobile CEO John Legere responded to the complaint, calling the claims "unfounded and without merit" and said that the FTC was "sensationalizing" the issue.

"T-Mobile is NOT participating in any form of cramming, stuffing charges for un-purchased services, or trying to be anything less than totally transparent with each of our customers," Legere wrote in a letter posted on T-Mobile's website earlier this month.

When contacted by CNET about the Senate report, a T-Mobile spokesperson said the company has a "comprehensive proactive refund program" under way. A Verizon spokesperson said the company had nothing to share at this time and AT&T did not respond to a request for comment. A Sprint spokesperson said the carrier issues refunds for unauthorized third-party charges and displays a designated "third-party charges" section on its invoices.

"Sprint recognizes that a poor customer experience -- particularly one that hits the customer's wallet -- damages its relationship with customers, even when Sprint is not directly providing the third party service," the spokesperson told CNET. "For this reason, Sprint does not tolerate wireless cramming, and we continuously review and improve our comprehensive safeguards to prevent, detect, and address any such instances."

In the Senate report, lawmakers say that despite wireless carriers pledging to stop cramming, the practice is still alive and well.

"The wireless industry was on notice at least as early as 2008 about significant wireless cramming concerns and problems with third-party vendor marketing tactics," the report reads, "yet carriers' anti-cramming policies and sometimes lax oversight left wide gaps in consumer protection."

Updated July 31 at 10:05 a.m. PT with comment from T-Mobile, Verizon, and Sprint.

 

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