Commentary

AT&T Settles 'Cramming' Charges, Will Refund $80 Million To Mobile Users

For the better part of the last decade, law enforcement authorities have waged a battle against companies that entice mobile users with offers for “free” products -- like ringtones or horoscopes -- obtain users' phone numbers, and then enroll them in paid subscription programs.

Yet despite some high-profile enforcement actions -- against mobile carriers as well as ad companies that “cram” charges on users' bills -- complaints about the practices have persisted.

Today, the Federal Trade Commission and Federal Communications Commission announced one of their most significant anti-cramming moves to date -- an enforcement action against AT&T.

Regulators said the telecom has already agreed to pay $105 million to resolve allegations that it charged numerous people $9.99 a month for subscriptions to services offering daily horoscopes, celebrity gossip and the like. Most of that settlement, $80 million, will go toward providing refunds to consumers.

AT&T said in a statement that it had “rigorous protections in place to guard consumers against unauthorized billing from these companies.”

Last year, the company stopped billing for third-party premium text-based subscription 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 ... the ability to get a refund,” the company stated.

But AT&T appeared all too eager to take consumers' money for the unwanted services, according to the FTC's legal complaint. First, the telecom buried information about the charges in customers' bills. Then, when consumers finally noticed the fees, the telecom made it difficult for them to obtain refunds, according to the complaint.

The FTC says that until October of 2011, AT&T would only refund three months' worth of charges, regardless of how long they went unnoticed by consumers. Subsequently, AT&T revised its refund policy -- for the worse.

“In October of 2011, AT&T notified its third-party merchants that it was changing its refund policy to 'help lower refunds,' and AT&T’s customer service representatives would be 'blocked' from offering more than a one-time two month refund,” the FTC alleges. “In numerous instances, AT&T has charged consumers for at least a year for third-party subscription services yet only offered a two month refund.”

AT&T itself took up to 40% of the revenue associated with the charges, according to regulators. In 2012 and 2013 alone, the company gleaned a total of $269 million from those fees, according to the FTC.

The complaint sets out a few examples, including one involving Tatto Media, which in 2009 agreed to pay more than $500,000 to the Washington State Attorney General for cramming.

AT&T isn't the only mobile carrier to allegedly garner revenue through cramming schemes. T-Mobile currently faces an FTC enforcement action over similar allegations.

As for the other carriers? FCC Chairman Tom Wheeler indicated today that they could be next. “Stay tuned,” he said.

Meanwhile, Sen. Jay Rockefeller (D-W.Va.) cheered news of today's settlement, though he also warned that crammers won't quickly give up. “Self-regulation has proved ineffective at protecting consumers against both landline and wireless cramming, and I urge the enforcement community to remain vigilant as third-party wireless billing practices continue to evolve,” he said in a statement.

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