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Feds: TracFone ‘Unlimited Data’ was not unlimited

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Alex Brandon/AP

(Read caption) The Federal Trade Commission building in Washington on Wednesday, Jan. 28, 2015. The nation's largest prepaid mobile provider, TracFone Wireless, will pay $40 million to settle government claims that it misled millions of smartphone customers with promises of unlimited data service.

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Affordable cell phone service company TracFone must pay $40 million back to customers after advertising unlimited-data plans that actually cut off or throttled service after a set amount of data was used, according to the Federal Trade Commission.

The largest prepaid mobile provider in the United States, TracFone agreed to the multimillion-dollar settlement of charges that it had “deceived millions of consumers with hollow promises of ‘unlimited’ data service,” the FTC said Wednesday in a news release.

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The deals, which mostly offered unlimited monthly service for about $45, were advertised under various brands, including Straight Talk, Net10, Simple Mobile and Telcel America.

“The issue here is simple: when you promise consumers ‘unlimited,’ that means unlimited,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “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.”

TracFone had been advertising unlimited-data plans on television, radio and in print displays since 2009, according to the FTC. Instead, the commission says, TracFone would dramatically slow down service — a technique known as throttling — or cut it off altogether after a customer used a set amount of data in a 30-day period.

The commission said the data limit varied, but was often between 1 and 3 gigabytes of data. Throttled customers  had their service slowed from at least 60% all the way up to 90%, according to the FTC complaint.

In September 2013, TracFone began announcing its policy on throttling but, even then, “those disclosures were often not clear and conspicuous,” the commission said.

This is the second case brought by the FTC against a mobile provider for failing to live up to promises of unlimited data. A case against AT&T is currently in litigation.

Consumers who had a Straight Talk, Net10, Simple Mobile, or Telcel America unlimited plan before January 2015 can visit a Web page set up to let them file a claim for a refund. Refunds will be paid only to those whose service was slowed or cut off, but customers who aren’t sure are being encouraged to still file a claim to find out if they are eligible.