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T-Mobile US under fire as regulators investigate and sue for bogus billing

WASHINGTON--T-Mobile U.S. became the target of a government investigation and lawsuit Tuesday amid allegations that it bilked potentially hundreds of millions of dollars from its customers in fraudulent charges.

The announcement of a complaint filed in a court in Seattle by the Federal Trade Commission and an inquiry by the Federal Communications Commission is a blow to the reputation of the popular mobile phone provider, which had been making gains in the market by offering consumers flexible phone plans.

The complaint alleges that T-Mobile billed consumers for subscriptions to premium text services such as US$10-per-month horoscopes or updates on celebrity gossip that were never authorized by the account holder. The FTC alleges that T-Mobile collected as much as 40 percent of the charges, even after being alerted by other customers that the subscriptions were scams.

“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,” said FTC Chair Edith Ramirez in a statement. “The FTC's goal is to ensure that T-Mobile repays all its customers for these crammed charges.”

In a statement, T-Mobile called the allegations “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,” said John Legere, the company's chief executive, in a statement.

In June, with the FTC complaint imminent, T-Mobile announced it would reach out to customers and give them a chance to request a refund.

The practice is often referred to as “cramming”: businesses stuff a customer's bill with bogus charges associated with a third party. In this case, the FTC said, most T-Mobile customers never agreed to sign up for the services but were billed anyway.

T-Mobile says it tried to put consumer protections in place, but that many of the third-party vendors acted irresponsibly. The FTC counters that T-Mobile should have been tipped off that these text services were scams because of the high rate of customer complaints.

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This Sept. 12, 2012 file photo shows a man using a cellphone as he passes a T-Mobile store in New York.

(AP)

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