The second largest wireless service provider in the U.S., AT&T has agreed to pay $105 million for unauthorized cell phone billing charges to customers. Customers will be refunded a total of $80 million along with penalties of $25 million due to regulators. Cell phone users have complained for years that they have been charged for third-party services like trivia, horoscopes and love tips. These services also known as premium short messaging services were not requested by the customers but AT&T illegally billed them nevertheless by keeping 35 percent of the fees. This practice of putting unauthorized charges on consumer cell phone bills is known in the industry as cramming.
The settlement was negotiated by the Federal Trade Commission (FTC), the Federal Communications Commission (FCC) and all state attorney generals. The FTC said AT&T received 1.3 million calls from cell phone users questioning third-party charges in 2011 alone. Customers were regularly charged $9.99, which was added to their monthly billing.
This settlement by AT&T to pay $105 million for unauthorized charges is a good sign for consumers in general. In 2012 the company earned $108 million from the charges which grew to $161 million in 2013. According to the commission, AT&T misdirected the customers in making them ask the third-party service merchants for refunds. Billing statements were not transparent and customers using prepaid plans, who do not receive monthly bills, were most likely unaware of such charges.
AT&T said they discontinued billing for third-party services in December 2013, stating that they had thorough securities set up to protect customers against unapproved charging from these organizations. They also stated that this settlement would give customers an opportunity to get refunds if they knew that they were wrongfully charged. AT&T is the first among other companies who are being investigated to settle on grounds of cramming.
AT&T will be required to notify its cell phone users about the settlement. Henceforth, consent must be obtained from customers before they are billed for third-party charges. The company must provide a full refund or credit to customers who are billed for unauthorized third-party charges at any time after the settlement. They must educate customers about the fact that when they sign up for services their cell phone can be used to pay for third-party charges and how they can be blocked by the customer. There must be present a dedicated section in bills to customers on third-party charges which must clearly distinguish them from the wireless service provider’s charges.
This settlement of $105 million by AT&T for unauthorized charges is the biggest ever constructed against a cell phone organization. FTC has filed a comparable case against T-Mobile earlier this year along with many other companies that are under investigation. FCC has said that for excessively long, customers have been charged for things they did not purchase. Customers who believe that they have been charged outlandishly by AT&T can now submit a claim on the FTC website. This includes existing and former customers of AT&T who were victim of being charged for third-party services from January 2009.
By Sumit Nigam
Photo by Bill Bradford – Flickr