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.
AT&T Fined $105M for ‘Cramming’ Cell Phone Bills
Douglas F. Gansler, the state attorney general for Maryland, said that while many consumers did complain about the unauthorized charges on their bills, many other consumers likely never even noticed the charges and paid them without a whimper. “What’s troubling is how many complaints we didn’t receive,” he said. “People are getting these bills with $9.99 charges for data use or something they have no understanding [about them]. Most people don’t review their bills with that type of diligence and don’t report companies like AT&T and others. This isn’t Phil’s Phone Shack doing this, and if you think about 20 million people at $9.99 a month, we’re talking very, very large numbers and about many, many consumers who were frankly duped by this insidious, fraudulent conduct perpetrated by AT&T and other mobile companies.”
In an email reply to an inquiry from eWEEK about the settlement, Mark Siegel, executive director of media relations for AT&T, acknowledged the conclusion of the case. “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,” Siegel wrote. “This settlement gives our customers who believe they were wrongfully billed for [Premium Short Message Services] the ability to get a refund.”
Siegel wrote, “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.”
As part of the settlement, AT&T will also be required to implement procedures that will prevent such billings in the future, Ramirez said, including obtaining informed consent from customers for any such fee-based services they wish to add to their phone serves. That means that customers will have to choose to take such services through several steps that will prove their intent. AT&T will also have to notify all customers who may have been wrongly billed and advise them of the settlement and about how they can seek refunds.
AT&T Mobility had been including charges for third-party services on customer phone bills until January 2014, the FTC said.
The AT&T cramming case is the sixth enforcement action against a phone carrier for alleged cramming and slamming violations this year, according to the agencies.
AT&T is not the only major carrier to be facing potential cramming charges in the United States. In July, T-Mobile responded to an FTC complaint which accused T-Mobile of making bogus charges on customers’ bills. In a complaint filed July 1, the FTC charged T-Mobile with “making hundreds of millions of dollars by placing charges on mobile phone bills for purported ‘premium’ SMS [Short Message Service] subscriptions that, in many cases, were bogus charges that were never authorized by its customers.”
The FTC believes that T-Mobile received 35 to 40 percent of the total amount of charges for things like “flirting tips … or celebrity gossip,” which typically came at a cost of $9.99 per month.
In response to the FTC’s allegations, T-Mobile called the complaint “without merit.”
In November 2013, all four major cell phone companies—AT&T, Sprint, T-Mobile and Verizon—said they were working with federal and state legislators to crack down on mobile cramming, eWEEK reported at the time.