In what the FCC said was its largest enforcement action in its history, AT&T Mobility will pay $105 million to settle an investigation that the company billed customers tens of millions of dollars for unauthorized premium text messaging services, such as horoscopes, celebrity gossip and even “love alerts.”
The settlement was announced at a press conference with FCC chairman Tom Wheeler, FTC chairwoman Edith Ramirez, Vermont Attorney General William Sorrell and other regulators.
The FCC said that their enforcement bureau had received complaints that AT&T Mobility refused to issue refunds or would only refund one or two months of charges from third party text messaging services. The charges also included services for ringtones, wallpaper and even texted flirting tips. The charges were typically $9.99 per month, a practice that the FCC calls “cramming” because it is often not immediately apparent what the charges are on their bills.
“Carriers should be on notice that we will not tolerate any business practice that saddles consumers with unauthorized charges on their phone bills,” Wheeler said.
The settlement was negotiated in coordination with the FTC and attorneys general in all 50 states and the District of Columbia. AT&T Mobility will pay $80 million to be distributed to current and former customers. The company also will pay $20 million to state governments, and a $5 million penalty payment to the U.S. treasury.
The settlement also requires that AT&T Mobility no longer offer commercial third party “premium SMS” charges and to obtain express consent from customers before putting third-party charges on their bills. They also must revise billing practices to make sure that third-party charges are “clearly and conspicuously” identified on their bills.
Wheeler indicated that more enforcement actions are pending against wireless providers. “Stay tuned,” he told reporters on Wednesday. The FCC said that it has taken six enforcement actions this year against carriers for such “cramming,” with $20 million in proposed penalties.
In July, the FTC charged T-Mobile with hundreds of millions of dollars in charges for premium text messaging that in many cases were bogus fees. T-Mobile called the complaint “unfounded and without merit” and that that it had stopped billing for premium text messaging in 2013 and is offering full refunds to any customer who believes they were wrongly charged.
The enforcement action comes as AT&T is seeking FCC approval for its proposed merger with DirecTV. Wheeler declined to specify whether this enforcement action would have an impact on its review. “We look at these issues as they are presented to us,” he said, adding that the merger would be decided “on those merits.”