Update 11:49 a.m. CST: Adds FTC chairwoman comments, details of fine, Texas’s role and changes AT&T has agreed to.
Update 11:36 CST: AT&T spokesman comment added to story below.
WASHINGTON — Dallas-based AT&T, Inc. will pay $105 million to settle charges by the Federal Communications Commission and the Federal Trade Commission that its billing practices for millions of its wireless customers were deceptive.
It’s the largest-ever enforcement action by the FCC, and the first time the FTC and FCC have teamed up on a single fine.
The government’s case — which was assisted by state attorneys general offices in all 50 states — alleges that AT&T allowed third-party firms to place $9.99 monthly fees on AT&T wireless bills, even though AT&T had reason to know the bills were not authorized by their customers.
The fees were for premium texting services — from horoscopes to daily tidbits — and were bundled into the amount owed on the front page of AT&T’s bills, making it difficult for customers to realize that they were paying charges to another company.
The government also alleges that AT&T promised the companies to limit refunds as it became more and more common for customers to complain after the fact.
FCC chairman Tom Wheeler, a Democrat, said the $105 million fine is largest in FCC history. Some 20 million customers are caught up each year in so-called cramming, the practice of adding deceptive charges on monthly wireless bills, he said. That total includes customers from all wireless carriers.
He said AT&T typically took a 35 percent cut of the third-party charges.
“For too long consumers have been charged on their phone bills for things that they did not order,” Wheeler said at a press conference in Washington. He said millions of customers each year are caught by third-party charges they did not order. That has meant “hundreds of millions of dollars,” he said. “It stops today for ATT. This $105 million settlement is going to put money back in the wallets for consumers who are victimized by the practice. Millions of AT&T customers will be able to reclaim moneys that were fraudulently taken out of their wallets.”
As part of the deal, going forward, AT&T has promised not to allow third-party billing without express and informed consent from its customer, government officials said.
AT&T spokesman Mark Siegel said the company has already discontinued many of the third-party activities that gave rise to the complaints.
“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,” Siegel said.
“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.”
Of the $106 million fine, $80 million will be set aside for customers who believe they are owed a refund. The FTC has set up a website with information on how to submit a claim, at ftc.gov/att.
The government alleged Wednesday that even when customers complained to AT&T about the bills, the company purposely limited its maximum refund to two months, a police that the government says was touted to its business partners expressly to boost the third-party firms’ profits.
“Even when AT&T provided a refund, it would limit those refunds to a maximum of two months, which is far too stringent,” said FTC chairwoman Edith Ramirez.
Some third-party billing continues, but the settlement will require AT&T to get express permission from its customers before the bills are added.
Texas Attorney General Greg Abbott’s office participated in the settlement, a statement by his office confirms.
Beyond the $80 million for restitution, the $105 million fine includes $5 million to the FCC and $20 million to the states.
Abbott’s office says that Texas will receive the largest share of the $20 million.
“Texas will receive the highest share of the $20 million payment – approximately $1.17 million,” a statement sats. “One third of Texas’s share will reimburse the State’s legal fees, with the remaining two-thirds of the funds disbursed as civil penalties to the Texas Judicial Access Fund.”
According to a statement by Abbott’s office, specific steps that AT&T will take in the future for third-party billing include:
* Clearly disclose customers’ ability to block all third-party charges;
* Notify customers each time a third party is placing a premium text messaging service charge on their account;
* Provide customers who dispute a third-party charge – if the charge is not older than six years and has not been previously refunded – with a full refund or access to the customer’s express consent of the charges;
* Implement a new tracking system to monitor customers’ disputes of third-party charges; and
* Cooperate with future multistate investigations – particularly states’ subpoena requests for information from the new tracking system.