AT&T will pay the Federal Trade Commission $80 million to provide refunds to consumers the company unlawfully billed for unauthorized third-party charges, a practice known as mobile “cramming.”
The settlement is the biggest chunk of a larger $105 million settlement the telecom giant will pay to the FTC for over-billing customers. The settlement also requires that AT&T pay $20 million in penalties spread across all states including the District of Columbia, plus a fine of $5 million to the Federal Communications Commission (FCC).
The FTC alleges that AT&T billed its customers (without their consent) for hundreds of millions of dollars in charges on behalf of other companies, usually in amounts of $9.99 per month. These fees were often for subscriptions for services like ringtones and text messages containing love tips, horoscopes, and “fun facts.” The FTC says that AT&T kept at least 35 percent of the money billed to consumers.
“I am very pleased that this settlement will put tens of millions of dollars back in the pockets of consumers harmed by AT&T’s cramming of its mobile customers,” said FTC Chairwoman Edith Ramirez in a statement. “This case underscores the important fact that basic consumer protections – including that consumers should not be billed for charges they did not authorize – are fully applicable in the mobile environment.”
The FTC has set up an refund program for AT&T customers who believed they’ve been bilked. Beginning today, they can go to www.ftc.gov/att to submit a refund claim and find out more about the settlement.
The FTC held a press conference Wednesday on the settlement. Vermont attorney general Bill Sorrell, who was in attendance, was one of AT&T’s cramming victims. “If you’re looking at the face of a victim look right here,” Sorrell said.
In 2011, Sorrell said he began receiving $9.99 monthly charges on his AT&T mobile bill for “mobile love alerts” that surprised him. “There were monthly charges on my cell phone for services I didn’t authorize,” he said.
Sorrell said that when consumers in Vermont called AT&T to challenge the unauthorized charges, they were given the cold shoulder. “When they called, AT&T said, ‘You must have authorized this.'”
The settlement is part of a wider FTC effort to stop mobile carriers from cramming. The settlement is the FTC’s seventh mobile cramming case since 2013 and its second against a mobile phone carrier this year.
The FTC filed a complaint against T-Mobile in July, and that case is ongoing. T-Mobile said at the time that it had stopped billing for third-party services at the end of 2013.
Like T-Mobile, AT&T says it discontinued the third-party billing. “In the past, our wireless customers could purchase services like ringtones from other companies using Premium Short Messaging Services (PSMS), and we would put those charges on their bills,” an AT&T spokesperson said. “Other wireless carriers did the same.”
“While we had rigorous protections in place to guard consumers against unauthorized billing from these companies … ” the spokesperson said.
During the FTC’s investigation, it found that AT&T had received numerous complaints about the carrier’s practice of billing for third parties.
For some of the third-party content providers AT&T was billing for, as many as two out of every five AT&T customers had complaints.