AT&T To Pay $105 Million In Cramming Settlement

Will Act to Ensure Consumers are Aware of Phone Charges

The FCC, Federal Trade Commission and 51 state attorneys general Wednesday (Oct. 8) announced a $105 million settlement with AT&T over cramming, which are third party charges on bills that consumers did not know about, like horoscopes and celebrity gossip.

At a press conference at the Federal Trade Commission, FCC chairman Tom Wheeler said it was the first collaborative effort with the FTC and state AG's, but would not be the last cramming shoe to drop. He also said it was the largest cramming settlement ever, and the FCC's largest enforcement action settlement ever.

FTC chair Edith Ramirez said that AT&T had a “strong reason” to suspect the charges were unauthorized, but placed them on the bills anyway. She said it was the seventh mobile cramming related case in the past year.

AT&T, Verizon, Sprint and T-Mobile agreed last fall to stop the practice of adding third-party billing for PSMS (premium short messaging services (PSMS), but the settlement deals with AT&T conduct before that.

Wheeler said that for too long consumers had been charged for services they did not want and did not authorize and that as many as 20 million people could have been affected annually by cramming across the spectrum of wireless carriers. He said the "fraudulent" conduct "stops today for AT&T and "stay tuned" for other wireless providers.

Maryland Attorney General Doug Gansler, one of the lead AG's in the efforts, pointed out it was reputable companies engaging in what he called insidious, fraudulent conduct. 

Consumers are being urged to go over their bills and file for a refund. But that may not be easy. One key could be a $9.99 charge, which Wheeler said was often the charge for those "crammed" services. In some cases, said Vermont AG William Sorrell, the name may be hard to identify as a third party, like the company that went under "Basic Data Plan" on consumer's bills.

According to the settlement, $80 million of the total will go to consumer refunds, administered by the FTC, with $20 million going to the state AG's and $5 million going to the FCC.

AT&T also has to take a number of remedial steps to insure that consumers have given express consent to charges and make it clear on the bills. The company has to provide a full refund for unauthorized charges.

The settlement does not preclude action involving the other three carriers. T-Mobile, for one, has argued the FTC was sensationalizing the cramming charges.

Wheeler did not say what, if any, impact the consent decree would have on the FCC's vetting of its proposed purchase of DirecTV.

“In the past, our wireless customers could purchase services like ringtones from other companies using Premium Short Messaging Services (PSMS) and we would put those charges on their bills," said AT&T in a statement.

“While we had rigorous protections in place to guard consumers against unauthorized billing from these companies, last year we discontinued third-party billing for PSMS services.

“Today, we reached a broad settlement to resolve claims that some of our wireless customers were billed for charges from third-parties that the customers did not authorize. This settlement gives our customers who believe they were wrongfully billed for PSMS services the ability to get a refund.” 

"This sends a message that bad behavior is going to be punished, and consumers who got scammed are going to get some relief," said Delara Derakhshani, policy counsel for Consumers Union. "Cramming has put a serious hit on consumers’ pocketbooks.  People have been paying for hundreds of millions of dollars’ worth of unauthorized charges on their wireless bills.  It’s not just the small, under-the-radar companies that have been raking in the money. The major wireless carriers like AT&T have profited greatly from this illegal practice.”