The Federal Trade Commission (FTC) announced last week that AT&T has agreed to pay $105 million for adding unauthorized cell phone charges to customers’ bills, a practice known as cramming.
The telecommunications giant will pay $80 million to the FTC to be used for customer refunds. AT&T Mobility will pay $20 million to the state governments participating in the settlement. The company will pay a $5 million penalty payment to the U.S. Treasury, PC Magazine reports.
At issue in the settlement are monthly subscription charges for such things as ringtones, wallpaper, and text messages with horoscopes, celebrity gossip, and so on. In many cases, customers had not agreed to the charges, which were hidden on their bills as “AT&T Monthly Subscriptions,” leaving customers to believe the charges were for AT&T services, The Wall Street Journal reports. Typical charges were $9.99 per month, but some were as high as $60 per month. The FCC said AT&T colluded with third-party services to make sure users did not get refunds since AT&T kept 35 percent of such fees, PC Magazine reports. FCC chairwoman Edith Ramirez said AT&T promised the companies it would “help lower refunds” by refunding only up to two months worth of charges.
Several months ago the FTC filed suit against T-Mobile for failing to stop bogus charges on customers’ bills. T-Mobile denies the charges and the case is pending.
Tom Wheeler, chairman of the Federal Communications Commission (FCC), estimates that 20 million consumers are caught in cramming every year. In some cases, customers unwittingly signed up by downloading a ringtone or responding to a text, without realizing it came with a monthly subscription fee. In other instances, customers were billed without any action on their part. As part of the settlement, AT&T must obtain consent before placing third-party charges on customers’ wireless bills; must clearly indicate the charges; and must give customers the option to block third-party charges altogether, the WSJ reports.