AT&T Must Pay 105 Million Dollars for Cramming

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Summary: AT&T will pay $105 million as settlement for claims that it added unauthorized charges to customers’ bills and refused to issue refunds.

The Huffington Post reports that AT&T has agreed to pay $105 million as part of a settlement in response to claims that it added unauthorized charges on its customers’ cell phone bills, which is also known as cramming.

  

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Consumers complained for years that they were being charged for services they did not request, such as daily horoscopes or trivia. The settlement was negotiated by all states attorneys general, the Federal Trade Commission, and the Federal Communications Commission.

Roughly $80 million will be paid as refunds to customers, and another $20 million is earmarked for penalties and fees to each of the 50 states and Washington D.C. The FCC also issued a fine of $5 million.

The FTC stated that up to 40 percent of subscribers complained about additional charges to companies whose billing was handled by AT&T.

Maryland Attorney General Doug Gansler said, “What’s shocking to me, as I thought about this particular settlement, is that we’re talking about reputable companies like AT&T and others. This isn’t, you know, Phil’s Phone Shack that’s doing this.”

As a result, in November, AT&T, Verizon, Sprint, and T-Mobile US have stopped billing customers for third party services.

Tom Wheeler, the chairman of the FCC, said that 20 million consumers are ripped off in this manner, and that other wireless carriers are being analyzed. “Stay tuned,” he said, hinting that action may be taken against other carriers as well.

AT&T insisted it had “rigorous protections” against unauthorized billings, but it stopped using premium short messaging services, or PSMS. “We reached a broad settlement to resolve claims that some of our wireless customers were billed from third-parties that the customers did not authorize. This settlement gives our customers who believe they were wrongfully billed for PSMS the ability to get a refund,” an AT&T spokesman said in an email.

Edith Ramirez, the FTC chairwoman, said consumers were charged up to $9.99 for such services, that were included in “AT&T monthly subscriptions” on their bills. When customers complained, Ramirez said, “Instead of acting to stop the charges, AT&T 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.”

The FTC has also taken action against the smaller companies from which the charges originated.

Both the FCC and the Justice Department are examining AT&T’s proposal to purchase DirecTV for $48.5 billion.

The FCC is also investigating T-Mobile. In July, the FTC filed a complaint against the company, alleging that the company was cramming. It sought a court order to stop mobile cramming, provide refunds to customers, and let go of revenues received from cramming.

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