Millions of AT&T Mobility customers are eligible for a refund after the company agreed to a record-setting $105 million settlement with government agencies for billing users for third-party services they did not ask for.
The practice of charging customers for unauthorized services is known as “cramming,” and the AT&T investigation is the seventh of its kind conducted by the government this year. Wireless carriers also being investigated for “cramming” unauthorized charges into their bills include T-Mobile.
The AT&T penalty is the largest enforcement settlement of its kind for the Federal Communications Commission, which coordinated its investigation with the Federal Trade Commission and attorneys general from every state and the District of Columbia.
The FTC will be the venue dispersing $80 million of the refunds to customers who request reimbursement at the commission’s website. Another $20 million goes to state governments and $5 million goes to the U.S. Treasury.
Unauthorized charges included on AT&T customer bills before January included subscriptions for ringtones and text messages providing horoscopes, flirting tips, or celebrity gossip, each of which often cost $9.99 per month. During that time AT&T took “at least 35 percent of the charges” and refused to provide full refunds to people who unknowingly paid such extra fees for months, said FTC Chairwoman Edith Ramirez during a press conference Wednesday.
“Consumers must not be charged for goods and services they did not authorize,” Ramirez said.
AT&T bills were structured in a way that made it “impossible” for consumers to determine which services the company provided and which were sold by third parties, she said. To remedy this, AT&T must now get its customers’ informed consent for new charges, make their bills simpler to find such new charges and allow customers to block all third-party charges.
“We encourage AT&T wireless customers past and present to review their bills and claim their refunds,” said FCC Chairman Tom Wheeler during the press conference.
The enforcement against AT&T’s cramming is a “team victory,” Wheeler said, adding “it is estimated that 20 million consumers a year are caught in this kind of trap, costing hundreds of millions of dollars.”
“We have come together in what will not be the last time to address important consumer protection concerns,” he said, calling the agency partnership on AT&T “a blueprint” for future investigations. “Stay tuned about the other wireless providers.”
The partnership will likely boost the FTC’s investigation of T-Mobile’s alleged cramming practice, since the company “has argued that the FTC lacks jurisdiction because of its common carrier status,” says Harold Feld, senior vice president at Public Knowledge, a consumer advocacy group.
“The FTC is prohibited from investigating into ‘common carriers’ by statute, which gives exclusive jurisdiction to the FCC,” Feld says of the two agencies, indicating a coordinated effort with the FCC could dispel those concerns voiced by T-Mobile.
Ramirez also said during the press conference that she supports Wheeler’s net neutrality efforts.
Republican FTC Commissioner Maureen Ohlhausen has said she fears the proposed net neutrality rules to treat all online traffic equally may cause the trade commission to lose its Internet regulation authority to the FCC. Ramirez, a Democrat, was apparently trying to dismiss that notion and reassure that the two agencies have a good partnership.