City Sues T-Mobile for Violating Consumer Protection Law

September 5, 2019

Lawsuit alleges T-Mobile violated the City’s Consumer Protection Law by selling used phones as new, destroying customer credit scores, and using deceptive return polices, among other violations

NEW YORK—Mayor de Blasio and Department of Consumer and Worker Protection (DCWP) Commissioner Lorelei Salas today announced a lawsuit in the New York County Supreme Court against T-Mobile USA, Inc. (T-Mobile), the nation’s third largest wireless carrier, for violating the City’s Consumer Protection Law. The City alleges that T-Mobile has engaged in multiple deceptive practices, including selling used phones as new, enrolling customers in expensive financing plans without their consent, deceiving consumers about its refund policy, overcharging customers and failing to provide customers with legal receipts. The lawsuit alleges that T-Mobile, its subsidiary MetroPCS NY, and more than 50 of its authorized dealers and corporate stores across New York City violated the City’s Consumer Protection Law thousands of times.

“Companies that blatantly scam New Yorkers must be held accountable,” said Mayor de Blasio. “We are doing everything in our power to make sure that T-Mobile ends these deceptive practices and that customers who were taken advantage of get the restitution they are owed.”

“At the same time T-Mobile touts its Metro products and service and its great customer service ratings, its Metro by T-Mobile stores are scamming New Yorkers into buying used phones, tacking on additional costs, enrolling them in financing that’s destroying their credit, and then trapping them with their deceptive return policy and incomplete receipts,” said DCWP Commissioner Lorelei Salas. “T-Mobile’s rampant and repeated deception is made more troubling by the fact that these tactics particularly harm consumers who are simply seeking to find an affordable wireless plan.”

T-Mobile preyed on consumers who were buying phones from Metro by T-Mobile (Metro), which was formerly known as MetroPCS and is T-Mobile’s lower-priced prepaid (no contract) wireless service. Because Metro’s service does not involve contracts, it appeals to consumers who do not have a strong credit history. These consumers have limited wireless service options and are especially vulnerable to scams. The City is seeking for T-Mobile to stop all illegal activity, to forfeit the revenue gained from the deceptive practices so that the court can create a restitution fund for victims, to notify all major credit bureaus that the financing contracts were fraudulent so that related information can be removed from the consumers’ credit reports, and to pay civil penalties.   

T-Mobile has more than 83.1 million customers. In 2013, T-Mobile merged with MetroPCS, which already served consumers using a lower-priced, prepaid, no-contract model. In 2018, T-Mobile rebranded the lower-priced prepaid service as “Metro by T-Mobile,” promising “a new brand and new mission to give value-conscious consumers a trade-off free wireless experience.”

Following a year-long investigation, the lawsuit alleges, among other things, that T-Mobile’s deception practices include:

• Tricking customers into buying used phones.
  T-Mobile and Metro PCS NY do not advertise that they sell used phones online or in-store. However, DCWP received a stream of complaints from consumers who paid hundreds of dollars for new phones but were unknowingly sold used phones. DCWP found at least 21 instances of this activity in the last three years.

• Deceiving customers about financing.
  Partnering with third-party financing companies like SmartPay, Metro stores arrange for consumers to pay for phones over time using “rental purchase agreements” and leases. The terms of these contracts typically add hundreds of dollars to the advertised price. Metro stores deceive consumers about this financing, sometimes enrolling them without their knowledge by “e-signing” the contracts form them on a screen. This misconduct leads to consumers’ credit being ruined.

• Charging consumers illegal taxes, mystery fees, and fees for unwanted services.
  Metro stores overcharge their consumers in a variety of ways. For example, according to T-Mobile’s Metro-branded website, all monthly taxes and regulatory fees are included in the advertised prices of their monthly plan. But receipts show that customers are being charged separately for these fees. Some Metro stores sell phones at a discount, but then add taxes on the much higher, pre-discount figure, which is illegal under state law. Metro also charged several customers undisclosed and illegal activation fees, and for unwanted products and services like GPS navigation, extra lines, and hotspot capability.

• Trapping customers with a deceptive return policy.
  T-Mobile has a stingy return policy that it misrepresents on the Metro-branded website. While the website claims that phones have a “30 day guarantee,” its return policy’s fine print reads that if a phone is bought in-store, the consumer must return it within seven days. But all purchases are in-store because it is impossible to buy a phone from the Metro website. Also, when consumers ask Metro’s live chat for information about returns, the chatbot leaves out crucial information, like that the policy only applies to new Metro consumers. 

• Failing to provide legal receipts.
  Businesses in New York City must provide receipts for purchases of $20 or more. The receipt must include the name and address of the business, the amount of money paid for each item, make and model of any electronic that costs more than $100, and sales tax. Metro stores failed to include this information and, at times, even failed to provide a receipt at all. One Metro store employee became belligerent and swore at the consumer when asked for a receipt.

Most businesses that sell electronic items (like cell phones, laptops, tablets, cameras, and TVs) must have an electronic store license. Most of the Metro stores are licensed, however, if a store has less than 30 electronic items on display or if the area used to display the electronics is less than 20 percent of the public area of the store, it does not need an electronic store license. There are currently 2,967 licensed electronic stores. In 2018, DCWP conducted more than 2,900 inspections of electronic stores and issued more than 490 violations. In 2018, DCWP received approximately 1,035 complaints about electronic stores, making it the sixth most common category of complaint. The most common electronic store complaints are about the total selling price of items not being displayed, breach of contracts, and overcharging. Consumers can learn tips for buying electronics here and file a complaint at nyc.gov/dcwp or by calling 311.

DCWP’s lawsuit is being handled by Senior Staff Counsel Glenna Goldis, under the supervision of Associate General Counsel Nicole Arrindell of the General Counsel Division, which is led by General Counsel Tamala Boyd and Deputy General Counsel Michael Tiger.

“It is disturbing that T-Mobile would allegedly engage in these dishonest practices, taking advantage of working New Yorkers who are simply trying to find an affordable wireless plan. I thank the City for stepping forward and seeking justice for those who have been harmed or deceived by this unscrupulous behavior,” said Representative Nydia M. Velázquez. 

“As Chair of the Assembly Committee on Consumer Affairs and Protection, I am disappointed by the allegations made against T-Mobile. I appreciate that the City has taken action, and I am hopeful that consumers receive appropriate redress of their grievances.” said Assembly Member Michael G. DenDekker.

"Deceptive and fraudulent is not how any customer would want to describe the business they're purchasing products or services from. Yet T-Mobile lives up to these descriptors as they prey upon New Yorkers, all in the pursuit of turning a profit. In targeting vulnerable consumer with no contract deals, masking used products as new, among other grievances, T-Mobile treated their customers as opportunities, not people," said Council Member Rafael Espinal. "As Chair of the Committee on Consumer Affairs and Business Licensing, I am especially aware of the caliber we hold businesses to in New York City. T-Mobile should be ashamed of failing to meet this caliber by not only breaking the law but doing so in such a callous and harmful way to New Yorkers."