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Biden reaches phone cramming settlement with AT&T

Date Posted: Wednesday, October 8th, 2014
Categories:  Consumer Protection Department of Justice DOJ Press Releases Fraud

Wilmington – Attorney General Beau Biden announced today that his office, along with the Attorneys General of the other 49 States and the District of Columbia, the Federal Trade Commission, and the Federal Communications Commission, have reached settlements with AT&T Mobility LLC that resolves allegations the company placed charges for third-party services on consumers’ mobile telephone bills that had not been authorized by the consumer, a practice known as “mobile cramming.” The $105 million nationwide settlement includes $80 million in refunds to consumers who were “crammed” and a $25 million payment to the Attorneys General and the Federal Communications Commission. The Attorney General’s Consumer Protection Fund will receive $692,570 as a result of its participation in the investigation and the settlement.

“I’m disturbed that consumers were charged for cell phone services they neither sought nor agreed to pay,” Biden said. “That’s why we took action to end mobile cramming and why we’re holding AT&T accountable for its practices by securing refunds for victims. I urge AT&T’s Delaware customers who were victims of cramming to initiate a refund by visiting www.ftc.gov/att or to call our Consumer Hotline at 1-800-220-5424 if they have questions.”

Consumers who have been “crammed” often complain about charges, typically $9.99 per month, for “premium” text message subscription services that appear on their cell phone bills. These services, also known as “PSMS” subscriptions, commonly included features including horoscopes, trivia, and sports scores. The Attorneys General and federal regulators allege that cramming occurred when AT&T Mobility placed monthly charges on consumers’ mobile telephone bills for these services without the consumer’s knowledge or their consent. AT&T Mobility is the first mobile telephone provider to enter into national settlement to resolve allegations regarding cramming, and AT&T Mobility was among the four major mobile carriers – in addition to Verizon, Sprint and T-Mobile – that announced last fall it would cease billing their customers for commercial PSMS charges.

Under the terms of the settlements, AT&T Mobility is required to provide $80 million to a fund that will be administered by the Federal Trade Commission be used to pay refunds to consumers who were victims of cramming. AT&T customers who were crammed can submit refund claims by visiting www.ftc.gov/att, or contact the contact the Claims Administrator with questions about the refund program at 1-877-819-9692.

Today’s settlement also requires AT&T Mobility to alter its business practices by staying out of the commercial PSMS business – the platform to which law enforcement agencies attribute the lion’s share of the mobile cramming problem. In addition, AT&T Mobility is required to take a number of specific steps to ensure that it only bills consumers for third-party charges that have been authorized, including:
• 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 this settlement;
• inform its customers when the consumers sign up for services that their mobile phone can be used to pay for third-party charges, and must 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, must clearly distinguish them from AT&T Mobility’s charges, and must include in that same section information about the consumers’ ability to block third-party charges.

Deputy Attorney General Jillian Remming handled this matter for the Delaware Department of Justice.

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