AT&T Pays $105 Million to Settle Phony Charges on Phone BillsBy
AT&T has agreed to a $105 million settlement with federal agencies and state attorneys general for allowing companies to add fraudulent charges to its customers phone bills—and taking at least a 35 percent cut of what they made.
This process, known as cramming, has been around in various forms since the 1990s, and carriers have sworn numerous times to put an end to it. In total, customers have spent hundreds of millions of dollars on charges they never asked for, officials said in a press conference Wednesday. The Federal Communications Commission has taken 14 enforcement actions on cramming since 2010, covering $122 million in activity. The AT&T case is the largest such settlement in the agency’s history, according to FCC Chairman Tom Wheeler.
The settlement money will be split between consumers ($80 million, distributed through the Federal Trade Commission), the states ($20 million), and the FCC ($5 million). The FTC has set up a website for people who believe they deserve a refund.
While AT&T wasn’t the one directly charging for the services, FTC Chairwoman Edith Ramirez says that the company played a key role in the fraud. “We think its important to take action against all links in the chain here,” she said. The company, Ramirez argues, ”had strong reason to suspect that such charges were unauthorized, yet continued to place such charges on consumers’ bills.”
In some cases, 40 percent of the people being charged were complaining about the charges—yet, according to the FTC, the company also told the crammers that it would work to lower the proportion of people who got refunds. AT&T also made it nearly impossible for customers to understand what was going on by looking at bills.
The company made a lot of money by doing this. In 2013, for instance, AT&T earned $161 million from charges for third-party subscriptions. While not all of them were unauthorized, the large number shows that AT&T had a strong financial incentive to keep the charges flowing. (The total penalty that the company is paying amounts to about one-half of 1 percent of net income in 2013.)
AT&T wasn’t alone. Late last year all four of the country’s biggest wireless carriers said they had cut the practice out for good, acknowledging that they had failed to stop abuse.
Earlier this year the Federal Trade Commission filed a cramming suit against T-Mobile. Wheeler said there was nothing to report on that suit. “Stay tuned about the other wireless carriers,” he said.