AT&T is ordered to pay a sum of $105 million in fines and refunds after the Federal Trade Commission (FTC), in cooperation with the Federal Communications Commission (FCC), found America's second largest wireless carrier to have been cramming unauthorized third-party charges into their customers' monthly bills.
Majority of the fine, or $80 million, will be paid to the FTC, which will provide the refunds to millions of customers who have complained to AT&T's support line of unauthorized charges that usually come in amounts of $9.99 for subscriptions on premium short messaging services (PSMS) such as flirting tips, horoscopes and not-so-fun facts. Another $20 million will be paid as penalties to the 50 states and Washington D.C. while the remaining $5 million will go to the FCC.
"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," says Edith Ramirez, chairwoman of the FTC, 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."
In its complaint filed [pdf] before the District Court of the Northern District of Georgia, the FTC says the carrier received as many as 1.3 million customer calls asking for refunds for the unauthorized charges, with some third-party content providers seeing as much as a 40 percent refund rate. Later in the year, AT&T tweaked its refund policy so that it would offer only two months' worth of refunds as a way to "help lower refunds" for its partners.
Furthermore, the FTC says AT&T made it difficult for customers to realize they were paying for services they did not ask for since their monthly bills listed them as "AT&T Monthly Subscriptions," leading them to believe that they were paying for AT&T's services.
In late 2013, AT&T discontinued charging for premium SMS from third-party providers, in spite of the "rigorous protections in place to guard consumers against unauthorized billing," says AT&T spokesperson Fletcher Cook in a statement.
"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," says Cook. "This settlement gives our customers who believe they were wrongfully billed for PSMS services the ability to get a refund."
The settlement also orders AT&T to acquire customers' express consent before allowing its third-party partners to charge for services on their monthly bills, and customers will have the option to block third-party charges entirely.
Tom Wheeler, chairman of the FCC, says the settlement is the largest in mobile history and while it may be the first of its kind, it is "not the last, joint enforcement effort of the FCC, FTC and (state) attorney generals," hinting at future enforcement against other carriers also engaged in the practice of cramming.
"For too long, consumers have been charged on their phone bills for things they did not buy," says Wheeler. "It stops today for AT&T."
Also facing charges of cramming is T-Mobile, which is contesting a case filed by the FTC for allegedly cramming hundreds of millions of dollars in unauthorized third-party charges. Amazon is also facing a similar case when it was accused by the FTC of charging parents millions of dollars in unauthorized purchases by their children on their Kindle Fire and other Amazon devices.
