As part of a USD 105 million settlement with federal and state law enforcement officials, AT&T Mobility will pay USD 80 million to the Federal Trade Commission (FTC) to provide refunds to consumers the company unlawfully billed for unauthorised third-party charges, a practice referred to as mobile cramming. The refunds are part of a multi-agency settlement that also includes USD 20 million in penalties and fees paid to 50 states and the District of Columbia, as well as a USD 5 million penalty to the Federal Communications Commission (FCC).
In a complaint against AT&T, the FTC alleges that AT&T billed its customers for hundreds of millions of dollars in charges originated by other companies, using in amounts of USD 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 percent of the charges it imposed on its customers.
Beginning 8 October, consumers who believe they were charged by AT&T without their authorisation can visit www.ftc.gov/att to submit a refund claim and find out more about the FTC's refund programme under the settlement. This case is part of a larger FTC effort to curb mobile cramming. This is the FTC's seventh mobile cramming case since 2013, and its second case against a mobile phone carrier in 2014.
The FTC's investigation into AT&T showed that the company received very high volumes of consumer complaints related to the unauthorised third-party charges placed on consumer's phone bills. For some third-party content providers, complaints reached as high as 40 percent of subscriptions charged to AT&T consumers in a given month. In 2011, 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 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 unauthorised charges. Prior to that time, AT&T had offered refunds of up to three months' worth of charges. At that time, AT&T characterised its change in policy is designed to "help lower refunds."
In February 2012, one AT&T employee said in an email that "Cramming/Spamming has increased to a new level that cannot be tolerated from an AT&T or industry perspective," but according to the complaint, the company did not act to determine whether third parties had in fact gotten authorisation from consumers for the charges placed on their bills. In fact, the company denied refunds to many consumers, and in other cases referred the consumers to third-parties to seek refunds for the money consumers paid to AT&T.
The structure of AT&T's consumer bills compounded the problem of the unauthorised charges, according to the complaint, by making it very difficult for customers to know that third-party charges were being placed on their bills. On both the first page of printed bills and the summary of billed 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 its settlement with the FTC, AT&T must notify all of its current customers who were billed for unauthorised third-party charges for the settlement and the refund programme by text message, email, paper bill insert and notification on an online bill. Former customers may be contacted by the FTC's refund administrator.
In addition to the refund requirements, AT&T is also required to obtain consumers' express, informed consent before placing any third-party charges on a consumer's mobile phone bill. In addition, the company must clearly indicate any third-party charges on a consumers' bill and provide consumers with the option to block third-party charges from being placed on their bill.
The Commission vote authorising the staff to file the complaint and approving the proposal stipulated order was 5-0. The FTC filed the complaint and proposed stipulation order in the US District Court for the Northern District of Georgia. The proposed stipulated order is subject to court approval.
