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AT&T forks over $105M to settle federal cramming probe

If you were ever an AT&T customer that found yourself paying for SMS horoscope or celebrity gossip subscriptions you didn’t want, you might have some money coming your way. In a settlement with the U.S. Federal Trade Commission, the Federal Communications Commission and 51 states Attorneys General, AT&T has agreed to pay the government $105 million, $80 million of which will be returned to AT&T customers as refunds.

The practice is called cramming, and in the mobile carriers’ case it involves premium SMS, a dinosaur left over from the pre-smartphone age used to delivered content to consumers’ phones through text messages. Considering most people can get horoscope and celebrity news free on their mobile browsers, many premium SMS providers have evolved from content providers into scammers, tricking consumers into signing up for their subscriptions and fraudulently placing charges on their bills. According to the FTC, the typical charge is $9.99 a month.

The Feds have been pursuing cases against crammers like Wise Media, but they’ve also been targeting the carriers alleging they’ve been just as complicit in these scams and taking in a cool 35 percent of any subscription fee. Speaking at press conference in Washington, FTC Chairwoman Edith Ramirez said that profit motive led carriers to act just as disreputably as crammers, ignoring what they knew or suspected to be fraudulent charges, hiding subscription fees on their bills and even assuring cramming customers that they would limit refunds to customers to only two months of charges.

An example of a premium SMS charge on a T-Mobile bill (Source: FTC)
An example of a premium SMS charge on a T-Mobile bill (Source: FTC)

The FTC and FCC are also investigating T-Mobile for cramming practices, and other operators might also find themselves the targets of federal probes. All of the carriers claim they have stopped allowing billing for most premium SMS services (AT&T says it stopped the practice in December of 2013), but the FCC Chairman Tom Wheeler said regulators are looking into new scams that have placed such as fraudulent carrier billing charges, where the cost of an app or service is placed directly on your phone bill.

The settlement is the biggest enforcement action in the FCC’s history (though not the FTC’s) and it may well be indicative of the big enforcement stick Wheeler promised he would wave when he first took office (see our interview with Wheeler from last November). A fine of $105 million may not do much to affect AT&T’s bottom line, but it may be big enough to act as deterrent to any other cramming shenanigans.

If you think[company] AT&T[/company] owes you money for premium SMS charges billed in 2009 or later, you can apply for a refund at the www.ftc.gov/att. While $80 million will go to pay those refunds, $20 millions will go to the states as penalties and fees and $5 million goes to the FCC in the form of a direct fine.

4 Responses to “AT&T forks over $105M to settle federal cramming probe”

  1. Car_Melo

    An example of how the FCC can use Title II (specifically in this case, 201(a)) to protect consumers, in non-monopoly, non-telephone markets. I’m looking out the window, and the sky didn’t fall. Funny that.

  2. Just an opinion

    This is a pass-through charge that the carriers make very little money on. While I agree that carriers weren’t falling all over themselves to resolve the problem, when customers decide a year later to dispute the changes, it’s more difficult to resolve.