AT&T Agrees to Record $105 Million Settlement in Cramming Case

By Josh Long

The Federal Communications Commission on Wednesday announced a $105 million settlement with AT&T Mobility to resolve allegations that the wireless giant charged subscribers millions of dollars for services they did not authorize.

The action against AT&T ranks as the largest enforcement action and biggest cramming settlement in the FCC’s history, the agency’s chairman Tom Wheeler told reporters during a press conference.

“For too long, consumers have been charged on their phone bills for things they did not buy,” Wheeler said. “It’s estimated that 20 million consumers a year are caught in this kind of trap costing hundreds of millions of dollars. It stops today for AT&T.”

AT&T Mobility, whose base of branded smartphone subscribers totals roughly 61 million, has agreed to earmark $80 million for distributions to current and former customers who were charged for third-party services they did not authorize. The company also will pay $20 million to state governments involved in the settlement, and $5 million to the U.S. Treasury.

The government alleged AT&T charged customers without their authorization for such monthly subscriptions as ringtones, wallpaper and text messages, which provided such information as horoscopes, flirting tips and celebrity gossip. The typical charge for the services was $9.99 per month, the FCC said, but Vermont Attorney General William Sorrell told reporters the bills ranged widely, with one Vermont resident reporting that he had been charged nearly $60 per month in the summer of 2010 for a service he hadn’t authorized.

In a survey of Vermont residents, Sorrell’s office found 60 percent of customers who had received third-party charges hadn’t authorized them, he said.

The enforcement action against AT&T represents a collaboration between the FCC, Federal Trade Commission and 51 attorneys general. Wheeler called it the “first but not the last joint enforcement effort of the FCC, FTC and the attorneys general.”

AT&T had reason to believe the third-party charges were unauthorized but continued to place them, and the company pocketed 35 percent of each charge, Edith Ramirez, chairwoman of the FTC, said during the press conference. AT&T’s bills made it difficult, if not impossible, for customers to determine that they were being charged for services they hadn’t authorized, she said.

Last year, AT&T discontinued third-party billing for premium short messaging services, said an AT&T spokesman, who noted the company previously had “rigorous protection in place to guard consumers against unauthorized billing.”

“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,” the spokesperson said. “This settlement gives our customers who believe they were wrongfully billed for PSMS services the ability to get a refund.” 

The settlement provides for consumer protections to ensure AT&T customers aren’t billed for third-party services without their informed consent. Third-party charges must be clearly and conspicuously identified on subscribers’ bills, the FCC said.

The FCC said AT&T Mobility also has agreed to cease offering commercial third-party “premium SMS” services.

Since January 2014, the FCC has taken six enforcement actions against carriers for alleged cramming and slamming violations, resulting in roughly $20 million in proposed penalties and payments to the U.S. Treasury.

Wheeler also cited an ongoing enforcement action against T-Mobile and said he and Ramirez have had discussions concerning the matter.

“We are moving with all deliberate speed,” Wheeler said, referring to T-Mobile.

T-Mobile did not immediately respond to a request for comment.

In a complaint filed over the summer, the FTC filed a cramming lawsuit against T-Mobile USA. The complaint alleged that T-Mobile raked in hundreds of millions of dollars by charging subscribers for “premium” SMS subscriptions that customers hadn’t authorized.

John Legere, CEO of T-Mobile USA, characterized the lawsuit as “unfounded and without merit” in a statement after the lawsuit was announced.

“In fact T-Mobile stopped billing for these Premium SMS services last year and launched a proactive program to provide full refunds for any customer that feels that they were charged for something they did not want,” Legere said in the statement. “T-Mobile is fighting harder than any of the carriers to change the way the wireless industry operates and we are disappointed that the FTC has chosen to file this action against the most pro-consumer company in the industry rather than the real bad actors.”