AT&T to pay $80 million in cellphone refunds

AT&T has agreed to pay $105 million to settle changes that it illegally billed millions of customers for charges they never requested and didn’t want.

The Federal Communications Commission (FCC) and Federal Trade Commission (FTC) jointly announced the settlement on Wednesday, which will result in $80 million worth of refunds to customers who were unfairly charged, the agencies said.

{mosads}In addition to those refunds, the wireless giant will pay $20 million in penalties and fees to the 50 states and the District of Columbia and $5 million to the FCC.

“Today’s settlement… underscores the time-tested principle of consumer protection,” FTC Chairwoman Edith Ramirez said in a press conference announcing the settlement.

“Consumers must not be charged for goods and services that they didn’t authorize, whether it’s on their mobile phone, shopping online or at a brick and mortar store.”

The agencies, working with the nation’s 51 attorneys general, claimed that since at least 2009, AT&T charged subscribers hundreds of millions of dollars without their knowledge or consent, a practice known as “cramming.”

The charges often came in the form of $9.99 monthly fees for subscriptions to ring tones or messages with occasional celebrity gossip or horoscope updates. The fees were often buried on subscribers’ bills, though, and difficult for them to spot. 

“This should have and in fact did ring alarm bells at AT&T,” Ramirez said, yet the company did nothing to stop the charges and in fact made it more difficult to get a refund, she claimed.

“For too long, consumers have been charged on their phone bills for things they did not buy,” FCC Chairman Tom Wheeler said on Wednesday.

“This $105 million settlement is going to put money back into the wallets of consumers who were victimized by the practice,” he added. “Millions of AT&T customers will be able to reclaim moneys that were fraudulently taken out of their pockets.”

The settlement is the largest ever FCC enforcement action, the largest ever cramming settlement and the first joint enforcement action of the FCC, FTC and the nation’s attorneys general.

An AT&T spokesman said the company employed “rigorous protections” to protect people from unauthorized charges, and in December agreed to stop billing people for third-party texting services,

“This settlement gives our customers who believe they were wrongfully billed for [messaging] services the ability to get a refund,” the spokesman said.

Regulators have been putting a new focus on cramming in recent months. Wednesday’s action was the seventh the FTC has announced since last year.

The FTC has leveled similar charges against T-Mobile, but the company has fought back and accused the agency of taking a “sensationalized legal action.”

Across the country, about 20 million people a year are charged unauthorized fees on their cellphone bill, Wheeler said.

“Stay tuned about the other wireless providers,” he added.

In addition to the monetary payment, AT&T has also agreed to notify all of its customers about the settlement and their options for a refund. It has also committed to obtaining customers’ permission before adding any other companies’ charges to their phone bills in the future. 

Earlier this year, the Senate Commerce Committee released a report blasting the “widespread” practice of bogus cellphone charges.

Committee Chairman Jay Rockefeller (D-W.Va.) congratulated the two agencies on Wednesday’s action and told them to stay on watch. 

“Self-regulation has proved ineffective at protecting consumers against both landline and wireless cramming, and I urge the enforcement community to remain vigilant as third-party wireless billing practices continue to evolve,” Rockefeller said in a statement. 

This story was updated at 12:53 p.m.