AT&T Inc. (T) agreed to pay $105 million to settle claims that the company billed wireless customers for unauthorized charges for services including horoscopes, ring tones and love tips.
AT&T unlawfully billed customers for charges originated by other companies for subscriptions to the services, a practice known as mobile cramming, the Federal Trade Commission said in a statement today.
The FTC said $80 million of the settlement will be used for customer refunds to those billed for the unauthorized charges, while the remainder will pay state and federal fees and fines. Consumers can apply to the agency for refunds.
“This settlement will put tens of millions of dollars back in the pockets of consumers harmed by AT&T’s cramming of its mobile customers,” said FTC Chairwoman Edith Ramirez. “AT&T had strong reason to suspect that the charges were unauthorized, yet continued to place these charges on its customers’ bills.”
AT&T, the second-largest U.S. wireless carrier, is settling with the FTC, the Federal Communications Commission, all 50 states and the District of Columbia. The settlement was filed today along with a lawsuit in the U.S. District Court for the Northern District of Georgia.
The case is the seventh mobile cramming case brought by the FTC since 2013. The agency sued fourth-largest U.S. wireless carrier T-Mobile US Inc. (TMUS) in July over similar claims. The company denies the accusation and is fighting the case.
In third-party billing, a phone company places charges on a consumer’s bill for services offered by another company, often receiving a percentage of the amount charged.
AT&T “had rigorous protections in place to guard consumers against unauthorized billing” and last year stopped allowing third-party billing for certain services, Michael Balmoris, a spokesman, said in an e-mail.
Customers of other wireless companies also receive unauthorized third-party charges, FCC Chairman Tom Wheeler said today at a news conference in Washington.
“There are a lot of other carriers involved,” Wheeler said. “It’s 20 million across all of the wireless providers in America, not just AT&T, and stay tuned about the other wireless providers.”
The charges were an “unfortunate scam on millions and millions of Americans,” Vermont Attorney General William Sorrell said at the news conference.
According to the trade commission, Dallas-based AT&T billed its customers for hundreds of millions of dollars in charges originated by other companies, usually in amounts of $9.99 per month, for subscriptions for ring tones and text messages containing the love tips, horoscopes, and “fun facts.”
The structure of monthly bills made it hard for customers to know of third-party charges, which were listed as “AT&T Monthly Subscriptions,” the FTC said. AT&T kept at least 35 percent of the charges it imposed on its customers, the agency said.
AT&T received “very high volumes of consumer complaints,” the trade commission said. For some third-party content providers, complaints reached as high as 40 percent of subscriptions, the agency said. In 2011, AT&T received more than 1.3 million calls to its customer service department about the charges, according to the FTC.
AT&T needs to obtain consumers’ consent before placing third-party charges, the FTC said. The company must clearly indicate such charges, and let customers block them, the agency said.
T-Mobile has pushed back against the trade commission. Chief Executive Officer John Legere in a statement called the agency’s July lawsuit “unfounded and without merit.”
Legere said the third-party providers “should be held accountable” and that the FTC’s lawsuit was “misdirected.”
T-Mobile, based in Bellevue, Washington, received 35 percent to 40 percent of the total amount charged to consumers and earned hundreds of millions of dollars from the charges, according to the FTC.
The lawsuit against T-Mobile, filed in federal court in Seattle, seeks to recover consumer refunds for unauthorized charges. The amount could be “many millions,” said Jessica Rich, the director of the FTC’s consumer protection bureau.