T-Mobile to pay $90M for unauthorized charges on customers' bills

The settlement is the second largest ever for so-called "cramming," following one that the FCC reached with AT&T in October. It came just two days after the Consumer Financial Protection Bureau sued Sprint for the same practice.

Cramming involves sneaking third-party service charges onto phone bills without getting valid authorization from the subscriber. The most notorious type of unwanted service involved in cramming is PSMS (premium Short Message Service), in which consumers get recurring text messages on topics like jokes of the day and celebrity gossip. The settlements with AT&T and T-Mobile ban those carriers from putting any third-party PSMS charges on their bills. But there are other third-party charges that may appear on phone bills without authorization, including some types of purchases made within mobile apps.

T-Mobile let third parties continue billing its subscribers for services they never approved, even when as many as half the people getting billed for a service had complained to T-Mobile, said Travis LeBlanc, the FCC's enforcement chief. The carrier had a policy of investigating any service with a complaint rate higher than 15 percent, yet it let many of those companies keep putting their charges on T-Mobile bills, he said. T-Mobile got a 35 percent cut of the third-party charges, according to the FCC.

"We learned during this case that T-Mobile was in bed with the crammers," LeBlanc said on a conference call about the settlement on Friday. Under the settlement, T-Mobile did not admit or deny the allegations. The company did not immediately respond to a request for comment.

The carrier must pay at least $67.5 million to fund a program to pay its customers back, plus $18 million to state governments participating in the settlement and a $4.5 million penalty paid to the U.S. Treasury. If consumers' claims go higher, T-Mobile will have to pay them, with no upper limit. Consumers who believe they were wrongly charged will be able to apply for refunds at a website set up for the purpose. That site was not immediately available.

Like AT&T, T-Mobile also has to change its billing practices to make third-party charges more obvious and make it easier for subscribers to cancel them.

"We have now brought tangible relief from cramming to nearly 50 percent of all subscribers in the United States," LeBlanc said.

The settlement covers bills going back to June 2010. It was negotiated by the Federal Trade Commission and the attorneys general of all 50 states and the District of Columbia in addition to the FCC.

The FCC plans to review its rules on third-party billing next year, LeBlanc said.

Stephen Lawson covers mobile, storage and networking technologies for The IDG News Service. Follow Stephen on Twitter at @sdlawsonmedia. Stephen's e-mail address is stephen_lawson@idg.com