AT&T Agrees to $105M Settlement for Illegal Billing

AT&T Mobility LLC will pay $105 million to settle charges it illegally billed third-party charges to consumers nationwide, federal authorities announced Wednesday.

The company will pay $80 million to the Federal Trade Commission, which will be used to refund consumers. An additional $20 million in penalties and fees will be paid to all 50 states and the District of Columbia and a $5 million penalty will be paid to the Federal Communications Commission.

The FTC alleges that 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 ringtones and text messages containing love tips, horoscopes and "fun facts." In its complaint, the FTC alleges that AT&T kept at least 35% of the charges it imposed on customers.

The FTC’s investigation into AT&T showed that the company received high volumes of consumer complaints related to the unauthorized third-party charges placed on consumer's phone bills. For some third-party content providers, complaints reached as high as 40% of subscriptions charged to AT&T consumers in a given month. In 2011 alone, the FTC’s complaint states, AT&T received more than 1.3 million calls to its customer service department about the charges.

According to the FTC's complaint, in October 2011, AT&T altered its refund policy so that customer service representatives could only offer to refund two months' worth of charges to consumers who sought a refund, no matter how long the company had been billing customers for the unauthorized charges. Before then, AT&T had offered refunds of up to three months' worth of charges. At that time, AT&T characterized its change in policy as designed to "help lower refunds."

The structure of AT&T’s consumer bills compounded the problem of the unauthorized charges, according to the complaint, by making it difficult for customers to know that third-party charges were placed on their bills. On both the first page of printed bills and the summary of bills viewed online, consumers saw only a total amount due and due date with no indication the amount included charges placed on their bill by a third party. The complaint alleges that within online and printed bills, the fees were listed as "AT&T Monthly Subscriptions," leaving consumers to believe the charges were part of services provided by AT&T.

Under the terms of the settlement, AT&T must notify all of its current customers who were billed for unauthorized third-party charges of the settlement and the refund program by text message, e-mail, paper bill insert and notification on an online bill. Former customers may be contacted by the FTC’s refund administrator.

In addition to the refunds, AT&T also is required to obtain consumers’ express, informed consent before placing any third-party charges on a consumer’s mobile phone bill. Finally, the company must clearly indicate any third-party charges on the consumers’ bill and provide consumers with the option to block third-party charges from being placed on their bill.

The case is part of a larger FTC effort to stop mobile cramming. It is the FTC's seventh mobile cramming case since 2013, and its second against a mobile phone carrier this year. The FTC filed a complaint against T-Mobile in July, and that case is ongoing.

The most recent mobile cramming enforcement occurred in early August when Andrew Bachman, the operator of a massive mobile cramming scheme, agreed to surrender more than $1.2 million in assets to settle FTC charges. The assets included several bank accounts, two luxury cars, shares in a number of startup companies and multiple luxury watches.

The FTC also issued a staff report on mobile cramming in July.