AT&T agreed to pay $105 million to settle charges that it allowed third-party companies to bill subscribers for millions of dollars in unauthorized charges, federal and state law enforcement officials announced Wednesday.
Federal Trade Commission and Federal Communications Commission officials alleged that until January, AT&T billed subscribers for “hundreds of millions of dollars” in charges from outside companies. The charges for services like ringtone subscriptions usually cost $9.99 a month and AT&T kept at least 35 percent of the charges, federal officials said.
AT&T will pay $80 million to refund charges to current and former AT&T customers who were hit with unauthorized charges. States participating in the settlement agreement will get $20 million from AT&T to settle the charges and the federal government will get $5 million.
AT&T ran afoul of the FTC’s ongoing investigation into wireless cramming and the FCC’s truth-in-billing rules, which require companies to make it clear what consumers are being charged for on their monthly statements.
An AT&T spokesman wasn’t immediately available for comment.
Wireless cramming happens when a third-party company places a charge on a subscriber’s mobile phone bill without authorization. These so-called
“Premium SMS” charges are often for things like subscriptions to online horoscopes or celebrity gossip. A wireless carrier gets a cut of the charge.
The practice has been happening for years and the FTC began focusing on the issue after receiving hundreds of consumer complaints. Often it can be hard to find information about the charges or details about how to stop them, the FTC says.
The FTC sued T-Mobile in July, accusing the carrier of making hundreds of millions of dollars in fees by allowing known scammers to put fraudulent unauthorized charges on subscriber bills. T-Mobile denied the charges.
The government’s lawsuit against T-Mobile and settlement with AT&T over wireless cramming charges suggests that Sprint and Verizon Wireless could be targeted next, as all of the major carriers allowed the practice. An FTC spokesman declined to comment.
In July, a report from the Senate Commerce Committee chargedthat the country’s largest wireless carriers have known about the problem since 2008 but haven’t done enough to stop it because they receive anywhere from 30 to 40 percent of the charges, or hundreds of millions of dollars.
Last year, AT&T, T-Mobile, Verizon and Sprint announced plans to phase out such third-party billing services except in the case of charitable or political giving.
The wireless industry’s trade group, CTIA, has argued that there have been relatively few consumer complaints about wireless cramming, just 373 in 2013, and companies have worked with law enforcement officials to shut down scammers.
You can read the original story on RECODE.net