AT&T to Pay $105 Million Over Allegations of “Mobile Cramming”
Massachusetts to Receive $327,000 in Federal-State Settlement Over Unauthorized Cellphone Charges
BOSTON – A subsidiary of AT&T, Inc. has agreed to pay a total of $105 million pursuant to federal and state settlements over allegations that the company placed charges for third-party services on cellphone bills that had not been authorized by the consumer, a practice known as “mobile cramming,” Attorney General Martha Coakley announced today.
AG Coakley, along with 49 states and the District of Columbia, the U.S. Federal Trade Commission (FTC), and the Federal Communications Commission (FCC) reached settlements with AT&T Mobility LLC valued at $105 million, resolving claims that consumers were “crammed” with additional charges, typically $9.99 per month, for “premium” short messaging services (PSMS), or text message subscription services such as horoscopes, trivia, and sports scores, that the consumers had never heard of or requested.
“Mobile cramming is a major problem that continues to harm consumers in Massachusetts,” AG Coakley said. “Addressing this issue of unauthorized charges should be a priority for the entire mobile telephone industry. Our office will continue to work with other states to recover money for consumers victimized by this deceptive practice.”
The attorneys general and federal regulators allege that cramming occurred when AT&T Mobility placed charges on bills without the consumer’s knowledge or consent. In addition to Verizon, Sprint and T-Mobile, AT&T Mobility was among the four major mobile carriers that announced in November 2013 it would cease billing their customers for commercial PSMS charges, and is the first mobile telephone provider to enter into a national settlement to resolve allegations regarding cramming. Cases against the other carriers are ongoing.
Under the terms of the settlements, AT&T Mobility is required to provide an $80 million fund to repay consumers who were victims of cramming. The fund will be administered by the FTC.
AT&T Mobility also agreed to pay $20 million to the attorneys general and $5 million to the FCC. Massachusetts will receive more than $327,000.
Consumers can submit claims under the AT&T Mobility cramming refund program by visiting www.ftc.gov/att. If consumers are unsure about whether they are eligible for a refund, they can visit the claims website or contact the claims administrator at (877) 819-9692 for more information.
The settlement requires AT&T Mobility to stay out of the commercial PSMS business, the platform to which law enforcement agencies attribute the lion’s share of the mobile cramming problem. Additional terms require AT&T Mobility to take a number of steps designed to ensure that it only bills consumers for third-party charges that have been authorized, including the following:
- Obtain consumers’ express consent before billing consumers for third-party charges, and ensure that consumers are only charged for services if the consumer has been informed of all material terms and conditions of their payment;
- Provide a full refund or credit to consumers who are billed for unauthorized third-party charges at any time after the settlement;
- Inform its customers when they sign up for services that their mobile phone can be used to pay for third-party charges, and inform consumers of how those third-party charges can be blocked if the consumer doesn’t want to use their phone as a payment method for third-party products; and
- Present third-party charges in a dedicated section of consumers’ mobile phone bills, clearly distinguish them from AT&T Mobility’s charges, and include in that same section information about the consumers’ ability to block third-party charges.
In June 2013, AG Coakley along with 39 attorneys general sent comments to the FTC about putting an end to mobile cramming.
This matter was handled by Assistant Attorney General Mychii Snape and Deputy Chief David Monahan of Attorney General Coakley’s Consumer Protection Division.