Gov't: AT&T to pay $105M for bogus phone charges

AP News
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Posted: Oct 08, 2014 5:56 PM
Gov't: AT&T to pay $105M for bogus phone charges

WASHINGTON (AP) — AT&T wireless customers may want to take a closer look at their old phone bills because they may have money coming back to them.

The Federal Trade Commission said Wednesday that AT&T Mobility LLC, a subsidiary of the telecom giant, has agreed to a hefty $105 million settlement after the government accused the company of unlawfully billing customers for hundreds of millions of dollars in bogus charges — a practice known as cramming. The multi-agency settlement includes $80 million that will be paid to the FTC for consumer refunds.

According to the complaint, the charges appeared on AT&T phone bills but were from third-party companies for services people never asked to receive or were duped into subscribing to — things like horoscope texts, celebrity gossip or flirting tips. The fees were usually around $9.99 a month and were not easy for customers to find on their bills.

The FTC says AT&T kept at least 35 percent of the unauthorized charges it imposed on customers.

Plenty of consumers complained. In 2011 alone, AT&T received more than 1.3 million calls to its customer service department about the charges, the commission said.

"This should have and, in fact, did ring alarm bells at AT&T," FTC Chairwoman Edith Ramirez said at the settlement announcement. "But instead of acting to stop the charges, AT&T continued to make hundreds of millions of dollars from the practice."

In a statement, company spokesman Fletcher Cook said the settlement resolves "claims that some of our wireless customers were billed for charges from third-parties that the customers did not authorize."

He said AT&T last year discontinued third-party billing for premium short messaging services.

Those services offer ringtones or messaging programs provided by other companies and typically rely on text messages sent to consumers to initiate charges.

From the settlement, an additional $20 million in penalties and fees will go to 50 states and the District of Columbia. Another $5 million will be paid to the Federal Communications Commission.

FCC Chairman Tom Wheeler said the settlement should serve as notice to wireless carriers that unauthorized charges on phone bills will not be tolerated.

The third-party fees were listed on wireless bills as "AT&T Monthly Subscriptions," leading customers to believe the charges were part of services provided by AT&T.

Sometimes, third-party companies randomly pick phone numbers of people to sign up for their ringtones or texts without their knowledge or consent.

Other cramming might involve third-party vendors who offer gift cards, telling would-be recipients that they need to enter a contest for the card by providing their cell number and texting back a certain pin number. The vendors then would start charging customers' phone accounts for recurring charges unrelated to the gift-card offer.

Under terms of the settlement, AT&T will be required to get consumers' consent before placing any third-party charges on their bills. Customers also must have the option to block any third-party charges from being placed on their bills.

Consumers seeking refunds should go to the FTC's website, where they can make a claim for charges dating back to 2009. People will need to submit their name, phone number and account number if they have it. Refund representatives can then search bills for unauthorized charges.

This is the FTC's seventh mobile cramming case since 2013. In July, the commission sued T-Mobile in federal court in Seattle, accusing the mobile provider of wrongly charging customers for premium services they never authorized. T-Mobile has said it was already offering refunds to customers for those charges.