Telecom giant AT&T will pay a hefty $105 million settlement after the government accused the company of unlawfully billing wireless customers for tens of millions of dollars in bogus charges — a practice known as cramming.
The Federal Trade Commission said Wednesday that AT&T Mobility LLC, a subsidiary of AT&T, billed millions of customers for charges from third-party companies for services people never asked to receive or were duped into subscribing to — things like horoscope texts or flirting tips. The fees were usually small — $9.99 a month — and were not easy for customers to find on their bills.
“No one is above the law, including powerful multinational corporations, and I am pleased today’s settlement with AT&T Mobility protects consumers against being billed for services they did not request,” New York Attorney General Eric Schneiderman said in a statement.
According to the FTC complaint, AT&T kept at least 35 percent of the unauthorized charges it imposed on customers, who will now be able to get their money back. The multi-agency settlement includes $80 million that will be paid to the FTC for consumer refunds.
An additional $20 million in penalties and fees will go to 50 states and the District of Columbia. Another $5 million will be paid to the Federal Communications Commission.
"Today's enforcement action is a victory for consumers nationwide," FCC chairman Tom Wheeler said in a statement. "Carriers should be on notice that we will not tolerate any business practice that saddles consumers with unauthorized charges on their phone bills. This settlement – a joint effort between The FCC, FTC, all 50 states and the District of Columbia – is a prime example of government agencies working together on behalf of American consumers."
"We know now that wireless companies profited while their customers were fleeced by unscrupulous third parties who added millions of dollars in unauthorized charges to consumer phone bills," added FCC Enforcement Bureau Chief Travis LeBlanc in an FCC statement. "Today's historic settlement holds AT&T responsible for its billing practices and puts money directly back in the pockets of consumers."
The third-party fees were listed on wireless bills as "AT&T Monthly Subscriptions," which the FTC said left customers thinking that the charges were part of services provided by AT&T.
Sometimes the third-party companies would randomly pick phone numbers of people to sign up for their ringtones or texts without their knowledge or consent. Other times, the third-party vendors might offer gift cards, telling would-be recipients that they need to enter a contest for the card by providing their cell number and then texting back a certain pin number. The vendors then began charging customers' phone accounts for recurring charges unrelated to the gift-card offer.
Under terms of the settlement, AT&T will now be required to get consumers' consent before placing any third-party charges on their bills.