FTC fines TracFone $40 million for their misleading unlimited data claims

Several months ago, the Federal Trade Commission (FTC) announced that they were suing AT&T for “deceptive and unfair data throttling”. The FTC ended up filing a complaint in federal court against AT&T and asserted that the company was misleading millions of customers by charging them for “unlimited” data plans while reducing their data speeds, in some cases by nearly 90 percent.

Now, the FTC is again going after a wireless carrier for misleading customers with an unlimited data package that was quite limited. The FTC has come to a settlement with TracFone Wireless for throttling and cutting off consumers who purchased an unlimited data plan with them. As part of the settlement, TracFone will return $40 million to consumers who were throttled or cut off.

As the FTC noted today, TracFone had been advertising an unlimited service using a variety of brand names, including Straight Talk Wireless, Net10 Wireless, Simple Mobile, and Telcel America. This service included “unlimited talk, text, and data” for about $45 per month.

Except, TracFone then began to throttle some of the unlimited data plan customers by reducing their speeds between 60%-90% in the hopes of those customers then purchasing data-capped plans that cost more per month. Other unlimited data plan customers simply had their service shut off until the end of their 30-day billing cycle.

Customers also had no way of knowing about the throttling considering that TracFone’s terms and conditions often didn’t even disclose how it limited the customers’ data service nor did advertisements (as late as September 2013) state the throttling policy.

Based on the settlement, TracFone is now required to “clearly and conspicuously disclose any limits on the speed or quantity of its data service.”