AT&T must pay its mobile customers $80 million and cough up an additional $25 million in fees, the FCC has ruled, due to its long history of "cramming" hidden charges into its customers' cell phone bills. It is the largest Federal Communications Commission fine in history.
This year, the FCC and the Federal Trade Commission cracked down on cramming, the practice in which a third party sells ringtones, cell phone wallpapers, games, horoscopes, and the like through subscription services that are then recurrently billed by AT&T, T-Mobile, and other wireless carriers. The cell phone companies got kickbacks, while companies like Jamster (you might remember the commercials) got rich.
Thing is, customers didn't really know what they were signing up for. More than 40 percent of customers who signed up for the services asked for a refund.
This is how fees were hidden in AT&T bills. Images: FTC
According to the enforcement order (embedded below), AT&T was fined for "engaging in an unjust and unreasonable practice of billing consumers for products or services they had not authorized and failing to provide a brief, clear, non-misleading, plain language description of the third-party charges on the telephone bills sent to consumers."
The fees were often lumped in with others in a phone bill: On T-Mobile bills, for instance, the fees were called "Usage Charges." On AT&T bills, they were called "Variety Texts" or had names associated with the third party, such as "Mobizzo.com," according to the order.
"We now know that wireless companies profited while their customers were fleeced by unscrupulous third parties who added millions of dollars in unauthorized charges to consumer phone bills," Travis LeBlanc, the FCC's enforcement chief, said in an emailed statement.
Unlike T-Mobile, however, which was hit by the FTC with an investigation back in July, AT&T apparently copped to the practice and reached this settlement with the FCC, FTC, and all 50 states' attorney generals. Under the deal, the company's AT&T Mobility division will have to pay $80 million in refunds to customers who were affected, a $20 million fee to state governments who were involved in the settlement, and a $5 million fine to the US treasury.
"Carriers should be on notice that we will not tolerate any business practice that saddles consumers with unauthorized charges on their phone bills," FCC Chairman Tom Wheeler said.
That T-Mobile case is still ongoing, but, as part of this AT&T deal, the company can no longer offer "premium SMS" charges and have to promise to revise its customers' bills to make them easier to understand.
Since the beginning of the year, the FCC has taken six cramming enforcement actions, totaling roughly $20 million—this one obviously dwarfs that.
This is not likely to be the last enforcement action, fine, or settlement: "Stat tuned for other wireless providers," Wheeler said at a press conference.