AT&T Fined $105M for 'Cramming' Cell Phone Bills

AT&T will pay $80 million in refunds to customers for billing them for unwanted services and not reacting fast enough to reverse the charges when they complained.

AT&T cramming fine

AT&T Mobility is being fined a record $105 million by the Federal Communications Commission and the Federal Trade Commission for illegally "cramming" customer cell phone bills with extra, unauthorized charges and for refusing to adequately remove the charges when users complained.

The $105 million fine, which includes $80 million for direct refunds to customers as well as $25 million in penalties to be paid to the FCC, the FTC and to attorney generals across the United States, is the largest fine in the history of the FCC, according to the agency.

The enforcement action was announced in a Washington press conference on Oct. 8 and ends an investigation that had centered on allegations that AT&T had for years "billed customers millions of dollars in unauthorized third-party subscriptions and premium text messaging services," according to the FCC.

Consumers had been reporting incidents to the FCC about the bill-cramming practices for years, which resulted in extra charges that had never been authorized by cell phone customers, the agency said. Most of the charges were for $9.99 monthly fees for extra services, such as horoscope text messaging, celebrity gossip, fun facts or other third-party content that was provided by companies outside AT&T. The charges were posted on cell phone bills, however, under listings for AT&T services, according to the FCC.

"Today's enforcement action is a victory for consumers nationwide," FCC Chairman Tom Wheeler said during the press conference. "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 and all 50 states and the District of Columbia—is a prime example of government agencies working together on behalf of American consumers."

Under the practice, AT&T had racked up hundreds of millions of dollars in billings for the crammed services since at least 2009 and earned large sales commissions from the third-party vendors, the agency said.

Edith Ramirez, the chairwoman of the FTC, said that consumers who have been overcharged for the unwanted services can immediately begin requesting refunds for their losses through the FTC's Website.

"We allege that AT&T had strong reason to suspect that the charges were unauthorized, yet it continued to place these charges on its customers' bills," Ramirez said. "In some months, consumers requested refunds of more than 40 percent of the charges placed by some third parties. This should have, and in fact did, ring alarm bells at AT&T. But instead of acting to stop the charges, AT& continued to make hundreds of millions of dollars from the practice by taking at least 35 percent of every charge and refused to provide refunds to many consumers."

AT&T even went on to "reassure" some third-party providers that if consumers complained, they would only refund up to two months' worth of the disputed service fees, she said. "Consumers must not be charged for goods or services that they didn't authorize, whether it's on their mobile phone, shopping online or in a brick-and-mortar store," Ramirez said.