AT&T Inc has agreed to pay $105 million to settle allegations that it put unauthorized
charges on customers' cell phone bills, a practice known as cramming, the Federal
Trade Commission said. The settlement comes after years of complaints from consumers
about being charged for services, for example daily horoscopes or trivia, that they never
requested. AT&T will pay $80 million to refund customers while $20 million is earmarked
for penalties and fees to all 50 U.S. states and Washington, the FTC said. Another $5
million in penalties will go to the Federal Communications Commission. In its complaint,
the FTC alleged that for companies whose billing was handled by AT&T, as many as
40 percent of subscribers complained about the charges.Under pressure from state
attorneys general, AT&T, T-Mobile US, Verizon and Sprint agreed to stop billing customers
for such third-party services. AT&T said it had "rigorous protections" in place against
unauthorized billing but it eventually scrapped what it called premium short messaging
services, or PSMS services.
"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.
This settlement gives our customers who believe they were wrongfully billed for PSMS
services the ability to get a refund," an AT&T spokesman said in an emailed statement.
In July, the FTC filed a complaint against T-Mobile USA, accusing the wireless provider
of cramming millions of dollars of unauthorized charges onto customers' bills.The
commission asked the court to order T-Mobile US, the fourth-largest U.S. mobile phone
provider by number of customers, to stop mobile cramming, provide refunds and give up
any revenues from the practice.
The FCC is also investigating T-Mobile US for cramming. The FTC has also moved
against the smaller companies which originate the charges. The charges for ring tones,
subscriptions for love tips, horoscopes and the like sent to subscribers by text message
usually cost about $9.99 per month. The wireless carrier kept at least 35 percent of that
charge, the FTC said.They are often buried in multi-page cell phone bills and described
generically, for example as "usage charges."