U.S. Markets closed

T-Mobile faces FTC charges of overbilling, risks looking more "un-caring" than "un-carrier"

The Federal Trade Commission has filed charges against T-Mobile USA (TMUS) over claims it made “hundreds of millions of dollars by placing charges on mobile phone bills for purported ‘premium’ SMS subscriptions that, in many cases, were bogus charges that were never authorized by its customers.”

The FTC alleges that T-Mobile, the fourth largest cellular carrier in the U.S., placed unauthorized fees on customers’ bills for third-party services like horoscope information or celebrity gossip — content that typically costs $9.99 per month. The FTC says T-Mobile’s phone bills, which can be longer than 50 pages, “made it nearly impossible for consumers to find and understand third-party subscription charges…in some cases, T-Mobile claimed that consumers had authorized the charges despite having no proof of consumers doing so.”

T-Mobile was aware of these fraudulent charges since 2009 yet did not notify customers or stop the practice, according to the FTC’s complaint. Moreover, T-Mobile purportedly profited from the “mobile cramming” and received anywhere from 35% to 40% of the total amount charged to customers. The FTC included images of a T-Mobile customer's bill in its complaint:

Courtesy: www.ftc.gov

T-Mobile CEO John Legere responded to the suit on the company’s website:

“We have seen the complaint filed today by the FTC and find it to be unfounded and without merit. We exited this business late last year, and announced an aggressive program to take care of customers and we are disappointed that the FTC has instead chosen to file this sensationalized legal action.”

T-Mobile has been gaining traction with U.S. customers because of its “disruptive” subscription model (T-Mobile bills itself as the "un-carrier"). Under Legere’s leadership, the company has cut prices, slashed international roaming fees and allowed customers to upgrade to new phones more than once a year.

Yahoo Finance’s Jeff Macke says T-Mobile had “such a neat business model” but the FTC accusations are “a setback” for consumers.

Macke expects Sprint (S) will continue its bid for T-Mobile because “it’s a very friendly environment now to become a conglomerate” and “Sprint will jam this merger through as fast as possible because they think the courts will let them.”

Follow Yahoo Finance on Facebook and Twitter (@YahooFinance)!

More from Yahoo Finance

Three things this market should be worried about

Why Google wants to be your personal DJ

World Cup Twitter action may have given shares a kick, but what now?