The Federal Communications Commission said Wednesday telecommunications giant AT&T (NYSE:T) will pay $105 million to settle allegations it billed customers millions of dollars for third-party subscriptions and text-message services that were unauthorized.
The settlement, the largest in the FCC’s history, is part of a broad crackdown on “cramming,” or adding unauthorized fees to customers’ bills. T-Mobile US Inc. (NYSE:TMUS) has also been sued by the FCC over similar allegations.
In a statement, the regulatory agency said its enforcement bureau launched an investigation after receiving consumer complaints alleging that AT&T customers had been billed with months of unauthorized charges for third-party services they hadn’t requested.
Consumers had complained that AT&T Mobility either refused to issue refunds or would only refund one or two months’ worth of such charges, forcing consumers to pay the rest. AT&T Mobility had been charging $9.99 per month for an array of third-party services, including monthly subscriptions for ringtones, wallpapers, text messages providing horoscopes, flirting tips, celebrity gossip and other information, according to the FCC. That practice was ended earlier this year.
“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. Other wireless carriers did the same," AT&T spokesman Mark Siegel said 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 (some) services the ability to get a refund,” Siegel added.
The settlement was negotiated in coordination with the Federal Trade Commission and the attorneys general of all 50 states and the District of Columbia, the FCC said. Under the terms of the deal, AT&T Mobility will pay $80 million to current and former AT&T customers who were billed for third-party services they did not authorize. AT&T Mobility will also pay $20 million to state governments participating in the settlement, and make a $5 million penalty payment to the U.S. Treasury.
In addition, AT&T has agreed to a number of reforms that will better insulate consumers from unauthorized third-party charges, including obtaining “express informed consent” from customers prior to allowing third-party charges on their phone bills and revising their billing practices to ensure that third-party charges are “clearly and conspicuously identified on bills” so customers can see what services they are paying for, as well as a free service for customers to block all third party charges.
“Today’s enforcement action is a victory for consumers nationwide,” FCC Chairman Tom Wheeler said in the statement. “Carriers should be on notice that we will not tolerate any business practice that saddles consumers with unauthorized charges on their phone bills.”
Travis LeBlanc, chief of the FCC’s Enforcement Bureau, added: “We now know that wireless companies profited while their customers were fleeced by unscrupulous third parties who added millions of dollars in unauthorized charges to consumer phone bills. Today’s historic settlement holds AT&T responsible for its billing practices and puts money directly back into the pockets of consumers.”