Take note, mobile carriers: When you claim to offer unlimited data, you better stay true to your word, or you might just find the Federal Trade Commission knocking on your door.
TracFone, the largest prepaid mobile provider in the U.S., has learned this lesson the hard way. The company just agreed to pay $40 million to settle FTC charges that it deceived millions of consumers by telling them they had unlimited data, and then throttling speeds.
The FTC complaint alleged that TracFone—which operates Straight Talk, Net10, Simple Mobile, and TelCel America—cut off or "drastically slowed" data service after they had reached a fixed 30-day limit, without telling customers.
If you had an unlimited plan from Straight Talk, Net10, Simple Mobile, or TelCel America before January 2015, you can now file a claim for a refund. Refunds will be paid to any customer whose data service was slowed or cut off. If you had an unlimited plan, but aren't sure if your data service was slowed or cut off, file a claim anyway, the FTC advised.
"The issue here is simple: when you promise consumers 'unlimited,' that means unlimited," Jessica Rich, director of the FTC's consumer protection bureau, said in a statement. "This settlement means that Straight Talk, Net10, Simple Mobile, and Telcel America customers will be able to get money back from the company for services the company promised but didn't deliver."
The FTC said that TracFone marketed its "unlimited" data plans through TV, radio commercials, print advertisements, in-store displays, and other media. But despite its marketing promises, the company "regularly" slowed down data speeds after customers had used 1-3GB, and cut off data entirely at 4-5GB.
When customers reached these limits, they'd receive warning calls about their "excessive data usage," but were not informed about the data limits. Throttled customers often experienced slowdowns of at least 60 percent to 90 percent, which made streaming video next to impossible.
Furthermore, there was no technical reason for the company to limit data, such as to reduce network congestion, the FTC said. Internal documents showed that the company's throttling practices were created to simply "reduce the high costs" of providing the service it had promised.
TracFone's throttling practices started in 2009, and it wasn't until September 2013 that the company finally started disclosing what was going on. In many cases, however, these disclosures were hidden in very small print on the back of packages or cards where consumers were likely to miss them.
In addition to the $40 million in refunds it must pay, TracFone is prohibited from making any deceptive claims about its data plans and must clearly disclose any limits on the speed or quality of its data service going forward.
This is the second case the FTC has brought against a mobile provider for failing to live up to its promises of unlimited data. Its case against AT&T, announced in October, is currently in litigation.