News release courtesy of the Texas Attorney General’s Office:
The State of Texas, 49 states and the District of Columbia today announced the resolution of a multistate investigation into wireless carrier T-Mobile USA, Inc. for its role in the practice of unlawful cellphone “cramming” – the unlawful practice of placing unauthorized third-party charges on mobile phone accounts. Cramming occurs when third-party content providers enroll and bill mobile phone customers for their services – such as ringtones and recurring text messages containing trivia or horoscopes – without the customers’ knowledge or consent.
Widely recognized as a national leader in efforts to end cramming, the Internet and Privacy team of the Texas Attorney General’s Office served on the multistate coalition’s Executive Committee to investigate allegations that T-Mobile’s billing practices actually facilitated unscrupulous content providers’ mobile cramming. In addition to Texas, the Executive Committee team included attorneys general from Vermont, Florida, Maryland, Delaware, Washington and Oregon.
Under the agreement negotiated by Texas and the Executive Committee, T-Mobile agreed to settle the states’ claims for a total nationwide monetary value of at least $90 million – including $4.5 million to the Federal Communications Commission and $18 million to the states. Texas will receive nearly $1.06 million in payment. One third of Texas’s share will reimburse the State’s legal fees, with the remaining two-thirds of the funds disbursed as civil penalties pursuant to the Texas Deceptive Trade Practices Act.
As part of this legal action, T-Mobile has agreed to no longer bill for third-party Premium Short Message Services (PSMS) – which led to the unlawful cramming – and will be isolating other third-party billing charges on customer bills. In addition to allowing customers to more clearly see the remaining third-party charges on their bills, T-Mobile is also implementing a new system to ensure they obtain the express consent of customers prior to a purchase, and will also provide an electronic receipt to customers upon purchase.
Global restitution fund
The national agreement also requires T-Mobile to provide uncapped, nationwide restitution to compensate current and former T-Mobile customers who were improperly billed for third-party content providers’ products and services. Should T-Mobile’s claims program exceed the $90 million, T-Mobile must pay the additional restitution amounts.
Refund distribution process
Current and former T-Mobile customers eligible for a refund may have already received notice under T-Mobile’s program by email, text, or mail. Customers may also submit claims under the program by visiting www.t-mobilerefund.com. On that website, customers can submit a claim, find information about refund eligibility and how to obtain a refund, and request a free account summary that details PSMS purchases on their accounts. Customers who have questions about the program can visit the program website or call the refund administrator at (855) 382-6403.
Summary of agreement’s injunctive terms
In addition to requiring monetary payments to the states, the FTC and the FCC, today’s agreement requires T-Mobile to implement a new process for obtaining customers’ express consent to incur third-party charges. T-Mobile must display those charges in a clear, dedicated section on the customer’s bill. Among its terms, the agreement also requires the wireless telecommunications carrier to take the following actions:
Clearly disclose customers’ ability to block all third-party charges;
Notify customers each time a third party is placing a premium text messaging service charge on their account;
Provide customers who dispute a third-party charge – if the last charge is not older than three months and has not been previously refunded – with a full refund or access to the customer’s express consent of the charges;
Implement a new tracking system to monitor customers’ disputes of third-party charges; and
Cooperate with future multistate investigations – particularly states’ subpoena requests for information from the new tracking system.
The Texas Attorney General’s Office has earned a national reputation for its aggressive efforts to end the practice of mobile phone cramming. Since 2011, the Internet and Privacy team of the Texas Attorney General has taken the following enforcement actions against entities charged with using deceptive practices to enroll mobile phone customers unknowingly for unwanted subscription services:
State of Texas v. Eye Level Holdings d/b/a JAWA et al. – In May 2012, a Travis County district court ordered defendants Eye Level Holdings, LLC; Cylon, LLC; Jason Hope; and Wayne DeStefano to pay the State of Texas $2 million in settlement of the State’s 2011 legal action alleging that they improperly billed wireless customers in Texas.
State of Texas v. Cellzum et al. – In July 2014, the Texas Attorney General’s Office settled with California-based text messaging content provider Cellzum over the company’s misleading Texas cellphone owners into unknowingly enrolling in premium short messaging services that added a monthly $10 fee to their mobile phone bills.
State of Texas v. Mobile Messenger U.S. et al. – In November 2013, the State charged four text-messaging content providers and their billing aggregator, Mobile Messenger U.S. Inc., with participating in a massive effort to deceive customers and wireless carriers regarding the identity of content providers in order to facilitate continued deceptive and misleading marketing. The case remains pending in Travis County district court.
In the Matter of State of Texas and AT&T Mobility Inc. – In October 2014, AT&T settled cramming allegations from the State of Texas, 49 states and the District of Columbia for a total nationwide payment of $105 million – including $5 million to the FCC and $20 million to the states. As part of the nationwide payment, AT&T also established an $80 million restitution fund for affected customers.