T-Mobile profited from bogus fees for premium messages, FTC says

The charges come a month after T-Mobile unveiled a program to offer refunds to customers hit by premium text messages. T-Mobile calls the charges "unfounded."

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T-Mobile CEO John Legere at the Uncarrier 5 event in Seattle. James Martin/CNET

T-Mobile is in hot water with the Federal Trade Commission.

The FTC filed a complaint on Tuesday against T-Mobile, alleging that the carrier has made hundreds of millions of dollars on fees related to "premium" text messages that customers didn't sign up for. The agency claims T-Mobile received between 35 and 40 percent of the total amount charged to consumers in conduct going back to 2009.

The text messages, which are often sent as a joke of the day or flirting tips, can cost $9.99 a month. The act of putting a charge on a customer's bill without their knowledge is a dubious industry practice known as "cramming." The US carriers had agreed in November to end the practice, banning companies from sending these kinds of premium messages.

The charges come less than a month after T-Mobile introduced a program in which the carrier said it would proactively reach out to customers billed for these third-party services, giving them a chance to request a refund.

One of the aims of the FTC complaint is to ensure that every customer gets their refund, according to the Jessica Rich, director of consumer protection for the agency. The 35 to 40 percent cut of the fees amounts to hundreds of millions of dollars, and not the total amount taken from the customer, she said.

The FTC engaged in settlement negotiations with T-Mobile, but couldn't reach an agreement, Rich said.

T-Mobile CEO John Legere responded on the company's site, calling the FTC complaint "unfounded and without merit."

"T-Mobile is fighting harder than any of the carriers to change the way the wireless industry operates and we are disappointed that the FTC has chosen to file this action against the most pro-consumer company in the industry rather than the real bad actors," he said.

Rich added that the Federal Communications Commission opened up its own investigation into T-Mobile's cramming practices. CNET contacted the FCC, and we'll update the story when the agency responds.

The FTC's complaint alleges that T-Mobile's billing practices made it difficult for consumers to detect that they were being charged. The summary of the online bill didn't show that the charges were from a third party or part of a subscription. It also alleges that T-Mobile failed to issue refunds to some customers, offering only partial refunds to some, and directing other customers to the third party.

"It's wrong for a company like T-Mobile to profit from scams against its customers when there were clear warning signs the charges it was imposing were fraudulent," FTC Chairwoman Edith Ramirez said in a statement.

Updated at 12:21 pm and 1:17 pm PT: To include additional information from the FTC and a response from T-Mobile.