AT&T Mobility (NYSE: T) agreed to pay a $105 million penalty to settle an investigation by the FCC, which concluded the carrier billed customers millions of dollars in unauthorized third-party subscriptions and premium text messaging services. The FCC said the settlement is the largest enforcement action in its history.
The settlement was coordinated with the Federal Trade Commission and the attorneys general of all 50 states and the District of Columbia. AT&T will distribute $80 million to current and former customers who were billed for third-party services they did not authorize. Additionally, the carrier will pay $20 million to state governments participating in the settlement and will make a $5 million penalty payment to the U.S. Treasury.
The FCC's Enforcement Bureau launched its investigation after receiving consumer complaints alleging that AT&T customers had been billed for unauthorized charges for third-party services that they did not want. According to the FCC, in some cases the complaints alleged that AT&T refused to issue refunds or would only refund one or two months' worth of such charges. Until January 2014, AT&T included charges for third-party services--such as monthly subscriptions for ringtones, wallpaper and text messages providing horoscopes and other information--on its customers' bills. The charge for each of these types of subscriptions was typically $9.99 per month, the FCC said.
At a news conference today FCC Chairman Tom Wheeler said the settlement is "historic in many ways" and is the largest cramming settlement in history.
"For too long, consumers have been charged on their phone bills for things they did not buy," he said. "It's estimated that 20 million consumers a year are caught in this kind of trap, costing hundreds of millions of dollars. It stops today for AT&T."
Wheeler said the settlement "will put money back into the wallets of consumers who were victimized by the practice" and that millions of AT&T customers will be able to reclaim money. The FTC is administering the $80 million refund process.
AT&T discontinued billing for premium SMS content in December 2013. Today, Wheeler also said AT&T is going to require expressed, informed consent before anything is put on customers' bills. He said AT&T will make its bills clear and concise, and will inform customers both through their bills and via text message that they have a right to make a claim as part of the settlement.
"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," Siegel added. "This settlement gives our customers who believe they were wrongfully billed for PSMS services the ability to get a refund."
AT&T said it has taken steps over the years to prevent unauthorized charges, including offering a 60-day refund policy for third party charges, sending purchase notifications to consumers via text messaging alerting them of any third-party charges, and offering Purchase Blocker, which lets customers block third-party purchases altogether.
In November 2013, AT&T, Sprint (NYSE: S) and T-Mobile US (NYSE:TMUS) entered into an agreement with 45 states to stop billing customers for premium SMS messages they receive. Verizon Wireless (NYSE: VZ) was not part of the settlement but said that it would also discontinue the practice. The carriers continue to support text-to-donate for charitable programs and text-to-contribute for political campaigns.
In July the FTC alleged in a lawsuit that T-Mobile US (NYSE:TMUS) made "hundreds of millions of dollars" by knowingly charging customers for purported "premium" SMS subscriptions that, in many cases, were "bogus charges" customers never authorized. T-Mobile said the complaint is "unfounded and without merit."
Wheeler said he is in frequent contact with FTC Chairwoman Edith Ramirez on the T-Mobile case and that the FCC is "moving with all deliberate speed" on an enforcement action related to T-Mobile.
Wheeler also said the FCC and FTC are working together closely, and could take action against other wireless providers.
- see this FCC release
- see this FTC blog post
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