AT&T Hit With $105M Charge To Settle FCC And FTC Phone ‘Cramming’ Probe

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This is the largest cramming settlement ever, and the largest enforcement action that the FCC has ever taken, Chairman Tom Wheeler says. His agency, the FTC, and all state attorneys general charged that since 2009 AT&T helped to bilk wireless customers by slipping unauthorized monthly charges into bills for texting services — for example for horoscopes, celebrity gossip, and fun facts — as well as ringtones and wallpaper. The telco collected about 35% from the charges, typically about $9.99, which generated “hundreds of millions” of dollars, FTC Chairwoman Edith Ramirez says.

But AT&T Mobility agreed to settle the charges. It will pay $80M to current and former AT&T wireless subscribers hit with the bogus charges.  It also will pay $20M to state governments, and $5M to the U.S. Treasury. The company also agreed to stop offering commercial third-party “premium SMS” charges, ensure that consumers provide informed consent for any third party charges on their bills, and help subscribers to block all third party charges.

“It is not the last time [the FCC and FTC] will act jointly,” Wheeler says. “For too long consumers have been charged on their phone bills for things that they did not buy….It stops today for AT&T.” He declined to say whether the action might jeopardize AT&T’s plan to buy DirecTV: “We look at these issues as they’re presented to us,” he says. But Wheeler strongly hinted at additional anti-cramming actions, including against T-Mobile. “Chairwoman Ramirez and I are in frequent conversation about that topic,” he says.

The FTC chief noted that AT&T understood what was happening with the unauthorized charges. In 2011 it told partners that, although it might offer refunds to complaining customers, it also “sought to reassure that it would not provide full refunds – just up to 2 months, no matter how long the charges existed,” Ramirez says.

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