The Department of Commerce and Consumer Affairs’ Office of Consumer Protection announced Friday that Hawaii, 49 other states and the District of Columbia, the Federal Trade Commission, and the Federal Communications Commission reached settlements with T-Mobile USA Inc. of $90 million in payments, and resolves allegations T-Mobile placed unauthorized charges for third-party services on consumers’ mobile telephone bills, a practice known as “mobile cramming.”
More than 61,000 T-Mobile customers in Hawaii are believed to have incurred unauthorized cramming charges, according to the DCCA.
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 never heard of or requested. The states and federal regulators allege the cramming occurred when T-Mobile placed charges from third-parties on consumers’ mobile telephone bills without the consumer’s knowledge or consent.
“The action taken today by the Office of Consumer Protection achieves significant protections for Hawaii T-Mobile customers. Unauthorized cramming of third-party charges on their mobile phone bills is now prohibited,” said OCP Executive Director Bruce B. Kim. “Anyone who believes that they may have been the victim of such deceptive practices should contact T-Mobile as soon as possible to see if they qualify for a refund.”
T-Mobile is the second mobile telephone provider to enter into a nationwide settlement to resolve allegations regarding cramming; OCP announced a similar, $105 million settlement with AT&T in October. 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.
Under the terms of Friday’s settlements, T-Mobile must provide each victim of cramming 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 states and $4.5 million to the FCC.
Consumers can submit claims under the program by visiting 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 designed 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.
In addition to the refund program announced Friday, the Office of Consumer Protection reports that Hawaii will receive more than $203,000 for its participation in the settlement.
Landon Murata, a staff attorney at the Office of Consumer Protection, represented the state in this action.