The telecommunication giant AT&T will pay $105 million in penalties and refunds to consumers for unlawfully billing its customers’ cellphone accounts, federal and state regulators announced on Wednesday. Out of this amount, $80 million will be in the form of refunds to consumers unlawfully billed for unauthorized third party charges (called “cramming”) while $25 million will be by way of penalties spread across all states including the District of Columbia, plus a fine of $5 million to the Federal Communications Commission (FCC).
The settlement is the largest of seven such actions the F.T.C. has taken since April 2013. Federal Trade Commission will provide refunds to customers who were billed “hundreds of millions of dollars” in unauthorized charges for items including ringtones and text messages with love tips and horoscopes, the commission said.
John J. Legere, T-mobile’s chief, last month. The F.T.C. has accused the company of charging fees for texting services like “flirting tips” and “celebrity gossip” that customers never ordered.
“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,” Edith Ramirez, the F.T.C. chairwoman, said in a statement.
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.’”
“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.
Will other carriers – like Sprint or Verizon – get also be hit with cramming charges? “Stay tuned,” FTC Chairman Tom Wheeler said today.