AT&T has agreed to pay $105 million for adding unauthorized cell phone charges to its customers bills, the Federal Trade Commission and Federal Communications Commission announced today.
AT&T will pay $80 million to the FTC, which will be used for customer refunds; affected customers can go to ftc.gov/att to seek a refund. AT&T Mobility will also pay $20 million to state governments participating in the settlement, and will make a $5 million penalty payment to the U.S. Treasury.
At issue are bogus charges for monthly subscriptions to things like ringtones, wallpaper, and text messages with horoscopes, flirting tips, celebrity gossip, and more. Most of these charges were $9.99 per month, though in some cases they were as high as $60 per month.
In many cases, customers did not agree to these charges, which were hidden on phone bills, the FTC said. Meanwhile, AT&T colluded with these third-party services to make sure users did not get refunds since AT&T got a 35 percent cut of all sales.
"AT&T told these companies that it would 'help lower refunds' by only providing refunds up to two months worth of charges," Edith Ramirez, Chairwoman of the FTC, said during a Wednesday press conference.
The move comes several months after the FTC filed suit against T-Mobile for failing to stop bogus charges on customers' bills, also known as cramming - charges T-Mobile denies. Will other carriers - like Sprint or Verizon - get also be hit with cramming charges? "Stay tuned," FCC Chairman Tom Wheeler said today.
Chairman Wheeler said the deal is the largest cramming settlement and largest FCC enforcement action in history. It is notable, he said, because it is co-signed by 51 state attorneys general.
"For too long, consumers have been charged on their phone bills for things they did not buy," Wheeler said today. "It's estimated that 20 million consumers per year are caught in this type of [cramming] trap, [but] it stops today for AT&T."
"Today, we reached a broad settlement to resolve claims that some of our wireless customers were billed for charges from third-parties that the customers did not authorize," AT&T said in a statement. "This settlement gives our customers who believe they were wrongfully billed for PSMS [Premium Short Messaging Services] services the ability to get a refund."
AT&T pointed to a pledge it made alongside Sprint and T-Mobile last year to stop charging for spam or "premium" texts.
"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," AT&T said. "While we had rigorous protections in place to guard consumers against unauthorized billing from these companies, last year we discontinued third-party billing for PSMS services."
When asked about that pledge today, Chairwoman Ramirez said that "the carriers agreed to stop the premium text messaging services as of January 2014," but today's settlement "applies to all forms of billing...like direct-carrier billing, so this continues to be an issue."
As part of the deal, AT&T committed to the FCC that it will obtain express consent from consumers about third-party billing going forward, and revise its billing practices so consumers can easily see what they are paying for, and offer the option on block all third-party services.