T-Mobile accused of false advertising; New York AG investigates

T-Mobile is coming under scrutiny for its popular ad campaign promising to rip up service contracts and do away with hidden fees.

The office of New York Attorney General Eric Schneiderman is investigating complaints that the ads are misleading. And a letter alleging "deceptive marketing and abusive debt collection practices" is making its way to the Consumer Financial Protection Bureau, which is responsible for consumer financial products.

Critics, led by labor and consumer organization Change to Win, are blasting T-Mobile's advertising, saying the vast majority, or 91%, of its customers are locked into two-year loans for new phones and other equipment, known as an equipment installment plan. The phone loans, which must be paid off over 24 months and require a lump sum to exit, contradict T-Mobile's splashy ads promising consumers they can switch carriers at any time, said the letter to the CFPB, which was also signed by numerous civil rights and consumer advocacy groups, including the Consumer Federation of California. Customers who end their financing agreements before 24 months may end up owing more than if they were to break a traditional service contract — or be placed in debt collection "with little or no notice," according to the CFPB complaint.