AT&T Mobility is set to fork over $105 million in fines to the Federal Communications Commission connected to bogus charges to consumers for third-party subscriptions and premium text messaging services.
The fine, which the FCC said is the largest enforcement action in its history, is to resolve litigation that came from an investigation into AT&T Mobility’s billing practices. That investigation found that the carrier had billed consumers for months of unauthorized charges and in some cases refusing to issue refunds when requested by customers. Those charges were tied to monthly subscription services for ringtones, wallpaper and premium text messaging services that typically ran $10 per month.
As part of the settlement, AT&T Mobility will pay $80 million to be distributed to current and former customers impacted by the charges; $20 million will go to state governments participating in the settlement; and $5 million will be paid to the U.S. Treasury. AT&T Mobility will also no longer offer “commercial third-party ‘premium SMS’ charges,” will adopt a process to obtain express consent from customers prior to allowing third-party billing, more clearly label third-party billing to customers and offer a free service to customers that allows them to block third-party charges.
“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,” said Travis LeBlanc, chief of the FCC’s Enforcement Bureau. “Today’s historic settlement holds AT&T responsible for its billing practices and puts money directly back into the pockets of consumers.”
The Federal Trade Commission earlier this year accused T-Mobile US of similar “bill cramming,” claiming the operator raked in “hundreds of millions of dollars” from the practice. In its complaint, the FTC said T-Mobile US acted as the billing agent for such services, which in some cases had refund rates as high as 40%. The FTC claims such a high refund rate was “an obvious sign to T-Mobile that the charges were never authorized by its customers,” and that internal documents showed that the carrier had received a “high number of consumer complaints at least as early as 2012.”
T-Mobile US claimed the accusations are “unfounded and without merit,” though prior to the FTC action T-Mobile US announced it would begin reaching out to customers that may have been incorrectly charged for third-party, premium messaging services that the carrier used to allow access to through its billing platform. T-Mobile US announced last November that it would stop supporting such billing arrangements.
The premium SMS services market has gained a reputation as being filled with fraudulent billing schemes, which wireless carriers have tried to combat.
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