Wednesday, October 8, 2014

Breaking: AT&T to Pay Government $105 Million For Cramming

by Karl Bode 12:07PM Wednesday Oct 08 2014  DSLReports
I've noted for years that while the government likes to take smaller companies quickly to task for cramming, they've long ignored the role larger telecom carriers play in the practice. That changed today after the FTC and FCC held a joint press conference announcing that AT&T would be settling a government investigation into their role in helping facilitate cramming. According to a FTC announcement, AT&T will pay $80 million to the FTC, $20 million in penalties and fees to all fifty states, and another $5 million to the FCC.

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According to the FTC, AT&T turned a blind eye while a myriad of companies billed the company's customers for a variety of services they never asked for -- usually to the tune of $10 or so a month. The complaint states that AT&T usually kept around 35% of the proceeds, incentivizing the carrier's apathy and encouragement of the practice.

The settlement notes that customers are also eligible for refunds, and if they were a victim of AT&T's cramming practices can apply for a refund here.

The agency states that their investigation found that at times, user complaints impacted as many as 40% of AT&T subscriptions in a month. The agency notes that in 2011 alone, AT&T received more than 1.3 million calls to its customer service department about the charges.

Yet despite this customer outrage AT&T made it increasingly more difficult for consumers to get refunds. The company in 2011 actually reduced the number of months of bogus charges they were willing to provide refunds for from three to two, and the FTC states AT&T intentionally designed their bill appearance to make ferreting out these charges more difficult.

As I've noted in the past, AT&T certainly isn't alone in turning a blind eye to this practice, and you can probably expect similar settlements with Sprint and Verizon before long. The FTC sued T-Mobile earlier this year for their role in cramming, and that case is currently ongoing.

Pressure mounted on regulators to finally start doing something when a 2012 study by the Senate Commerce Science and Transportation Committee found that landline consumers alone were charged $10 billion in third-party, unauthorized fees during a five year span. The study also found that AT&T, Qwest, Verizon and CenturyLink made at least $650 million as their cut during that time period. Only once landline usage was all but dead did carriers outright ban cramming on landlines in 2012.

Sensing regulatory scrutiny, AT&T finally discontinued billing for premium wireless SMS service in December of last year. While AT&T probably makes $105 million in the time it took you to read this, the government finally doing its job and addressing such obvious fraud is still a win for end users who've been dealing with these obnoxious, bogus charges for years.

Update: I received the following statement from AT&T:
In the past, our wireless customers could purchase services like ringtones from other companies using Premium Short Messaging Services (PSMS) and we would put those charges on their bills. Other wireless carriers did the same.

While we had rigorous protections in place to guard consumers against unauthorized billing from these companies, last year we discontinued third-party billing for PSMS services.

Today, we reached a broad settlement to resolve claims that some of our wireless customers were billed for charges from third-parties that the customers did not authorize. This settlement gives our customers who believe they were wrongfully billed for PSMS services the ability to get a refund.

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