The slapping of $105 million penalty is likely to take a beating on the brand image of AT&T.
The allegation is that the wireless operator placed unauthorized charges for services including horoscopes, ring tones and love tips on customer bills though these mobile consumers never used these services.
AT&T is not the first wireless carrier in the U.S. to face similar charges. Earlier, the Federal Trade Commission sued T-Mobile US, fourth-largest U.S. wireless carrier in America, in July over similar claims.
The AT&T case is the seventh mobile cramming case brought by the FTC since 2013.
The Federal Trade Commission in a statement today said that AT&T unlawfully billed customers for charges originated by other companies for subscriptions to the services, a practice known as mobile cramming.
— FTC (@FTC) October 8, 2014
Out of $105 million penalty, $80 million will be used for customer refunds to those billed for the unauthorized charges, while the remainder will pay state and federal fees and fines. Consumers can apply to the agency for refunds, Bloomberg reported.
“This settlement will put tens of millions of dollars back in the pockets of consumers harmed by AT&T’s cramming of its mobile customers,” said FTC Chairwoman Edith Ramirez.
AT&T, the second-largest U.S. wireless carrier, is settling with the FTC, the Federal Communications Commission, all 50 states and the District of Columbia. The settlement was filed today along with a lawsuit in the U.S. District Court for the Northern District of Georgia.
Reuters reports that the settlement comes after years of complaints from consumers about being charged for services such as daily horoscopes that they never requested.
Under pressure from state attorneys general, AT&T, T-Mobile US, Verizon and Sprint, the top four telecom operators, agreed in November to stop billing customers for such third-party services.
The charges for ringtones, subscriptions for love tips, horoscopes and the like sent to subscribers by text message usually cost about $9.99 per month. They are buried in multi-page cell phone bills and described generically, for example as usage charges.
FCC says AT&T Mobility billed millions of customers for charges from third-party companies for services people never asked to receive or were duped into subscribing to — things like horoscope texts or flirting tips. The fees were not easy for customers to find on their bills.
According to the FTC complaint, AT&T kept at least 35 percent of the unauthorized charges it imposed on customers, who will now be able to get their money back.
The third-party fees were listed on wireless bills as AT&T Monthly Subscriptions, which the FTC said left customers thinking that the charges were part of services provided by AT&T.
Under terms of the settlement, AT&T will now be required to get consumers’ consent before placing any third-party charges on their bills.