The complaints relate to unauthorized third-party charges that were added to customers’ phone bills. Among the services charged to customers were horoscopes, ring tones and celebrity gossip, costing them an extra $9.99 per month.
Long-term abuse of third-party billing
It was announced by the agencies on Wednesday that the settlement includes $80 million for consumer refunds and $25 million in penalties. According to FTC Chairwoman Edith Ramirez, for years AT&T Inc. (NYSE:T) had been aware of issues with premium text-messaging services. Instead of protecting consumers, AT&T reassured third-parties that any customer refunds would be limited to two months.
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“This should have, and in fact did, ring alarm bells at AT&T,” she said. “Instead of acting to stop the practice, AT&T continued to make hundreds of millions of dollars from the practice.”
As well as taking up to a 35% cut of the third-party charges, AT&T Inc. (NYSE:T) combined these charges with customers’ monthy subscription on some bills, giving the impression that AT&T was providing the service and not a third party.
A commitment to further cooperation
As part of the settlement, AT&T Inc. (NYSE:T) has stopped premium text billing and will implement rigorous checks on third-party billing. Other reforms include clear disclosure of third-party charges on bills, and the need to obtain informed consent from customers before adding any third-party charges to their bills.
The AT&T settlement represents the largest in FCC history. It is also the first joint enforcement action with the FTC and state attorneys general, but FCC Chairman Tom Wheeler has assured consumers it will “not be the last time” that the agencies cooperate for the protection of consumers.
“This is a team victory for American consumers,” Wheeler said. “For too long, consumers have been charged on their phone bills for things they did not buy.”
It has been estimated that 20 million consumers per year are victims of phone-bill cramming. Earlier this year similar complaints were brought against T-Mobile US Inc (NYSE:TMUS), and the AT&T Inc. (NYSE:T) action is the seventh that the FTC has taken against phone-bill cramming since last year.