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T-Mobile Settles Government Lawsuit Over Cramming

T-Mobile has settled with the government over claims the wireless carrier aided cramming and turned a blind eye to the practice because it was profitable. Earlier this year the FTC sued T-Mobile over the practice, and now the FTC says T-Mobile will pay at least $90 million to customer refunds. According to the FTC announcement, in addition to the $90 million in refunds, T-Mobile will be paying $18 million in fines and penalties to the attorneys general of all 50 states and $4.5 million to the FCC.

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Cramming involves smaller companies signing consumers up for horoscope, "premium text message," or other services they may not want, then charging them a $10 fee.

The FTC notes that complaint rates were so high T-mobile couldn't help but be aware the scams were taking place, but turned a blind eye to the practice because, like the other big three carriers, wireless operators stand to skim up to 40% off the top of sales of such services.

As with AT&T, the FTC notes that T-Mobile not only turned a blind eye to the practice of cramming, they intentionally made the line-item details on user bills difficult to understand.

For years I've noted that while the government liked to take smaller companies quickly to task for cramming to score easy legal wins and political points, they've long ignored the role larger telecom carriers play in the practice, in no short part due to these companies campaign contributions and political power.

This trend has been clearly been changing with the recent $105 million settlement with AT&T, and the rumored-to-be-looming settlement with Sprint. Of course the amount these companies are paying in fines are only likely a very small fraction of the profits gleaned from these sleazy efforts.
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elefante72
join:2010-12-03
East Amherst, NY

1 recommendation

elefante72

Member

Not a penalty a profit...

To me a financial "penalty" is one where you LOSE because of what you did, not get a slap on the wrist and buy a few jets with the profits. If they got fined $20m and make $100m, that is not a penalty, that is $80m in additional revenue gleaned from shady activities and maybe $40m in profit.

If I am a company, if I only had to pay out $18m and made $50m I would say that is a good day.

Now if they fined them actual damages, and then another penalty on top of that, now we are talking.

So maybe pay some 20 somethings a few K to social/media to spin it and some bogus credits and call it a day.
armed
join:2000-10-20

armed

Member

Re: Not a penalty a profit...

I think you are forgetting this is a negotiated settlement. The alternative is a costly trail with no guarantee of any fine or required repayment. Plus you will get a certain guarantee of a prolonged delay as T Mobile appeals through the courts any trial results they might not like.

$112 Million is not an insignificant sum when balanced against an unknown outcome of a trial.

Its always easier from the outside looking in.... right?

woody7
Premium Member
join:2000-10-13
Torrance, CA

woody7

Premium Member

Re: Not a penalty a profit...

with the paltry amount the customer receives I would rather take my chances in court. this amounts to another cost of doing business and will most likely be passed on. This should be criminal and not a "civil" . this is never going to end.
sgip2000
join:2004-05-05
Hillsboro, OR

sgip2000

Member

What about the customers?

How much will the customers get from this settlement?

MalibuMaxx
Premium Member
join:2007-02-06
Chesterton, IN

MalibuMaxx

Premium Member

Re: What about the customers?

0.00

keyboard5684
Sam
join:2001-08-01
Pittsburgh, PA

keyboard5684 to sgip2000

Member

to sgip2000
Nothing. However I was just credited ($40) for such a thing happening to me. A cool $10 a month fee I called and complained about.
armed
join:2000-10-20

armed to sgip2000

Member

to sgip2000
It says $90 million go to customer refunds.

This isn't a personal lawsuit where a high % goes to the winning attorneys.

keyboard5684
Sam
join:2001-08-01
Pittsburgh, PA

1 recommendation

keyboard5684

Member

Re: What about the customers?

I saw that $90 million and wondered. Maybe a $2 payment each?
armed
join:2000-10-20

armed

Member

Re: What about the customers?

I think the money will go to only those who were crammed.
rradina
join:2000-08-08
Chesterfield, MO

rradina

Member

Just Switched to TMO from ATT

ATT had a way to block text purchases/signups like this. After I had a similar "cramming" experience with ATT, I asked them to enable the block. Does anyone know if TMO offers something similar?

Flyonthewall
@206.248.154.x

1 recommendation

Flyonthewall

Anon

Breaking rules is a sound business model in America.

Just ask the mortgage companies or Wall Street. The public goes broke so they don't have to....

nycnetwork
join:2000-11-12
Brooklyn, NY

1 recommendation

nycnetwork

Member

Good lesson

So far all carriers have had similar cramming lawsuits, and it looks like they just don't learn or care. I'm sure this kind of texting scam won't happen again, but there will always be something new to watch out now that data usage is through the roof.