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AT&T to pay $150M to settle cramming case, covers $80M in refunds


For the first time, the Federal Communications Commission (FCC) and the Federal Trade Commission (FTC) have taken joint enforcement action in order to hold a major mobile service provider accountable for deceptive “cramming” practices.

On Wednesday, the agencies, along with state attorneys general for all 50 states and the District of Columbia, announced a $105 million settlement, which will allow AT&T to resolve accusations against it, avoiding even costlier penalties.

In the alleged cramming scheme, AT&T is accused of placing unauthorized charges on millions of consumers' phone bills. The charges, which were typically $9.99 per month, were for third-party services, like ringtones, horoscopes, celebrity gossip or other "fun fact" alerts, FTC chairwoman Edith Ramirez said in a Wednesday press conference.

She added that charges, listed as "AT&T monthly subscriptions” on consumer bills, often led customers to believe that the charges originated from the service provider, and not third-parties.

From the $150 million settlement, $80 million will be set aside for refunds to consumers “unlawfully billed,” a release from the FTC said. The settlement also includes $20 million in penalties and fees paid to the 50 states and the District of Columbia, along with a $5 million penalty to the FCC, the release said.

In the press conference, FCC chairman Tom Wheeler said the crackdown efforts were the “first, but not the last" joint enforcement action to be taken jointly by the FCC and FTC.

“It's the largest cramming settlement in history [and] the largest FCC enforcement action in history,” Wheeler said. “This $105 million settlement is going to put money back into the pockets of the consumers who were victimized,” he later added.

Consumers who were unfairly billed for premium short message service (PSMS) third-party charges as far back as Jan. 1, 2009 are eligible for refunds, the AT&T settlement order (PDF) filed Wednesday said.

Back in June, the FTC came after the alleged operators of a mobile cramming scam, ordering Lin Miao and corporate defendant Tatto to turn over $10 million in assets. Also this year, tech giants Apple and Google were forced to refund millions to consumers for in-app purchases made by children without parental consent. Apple was made to refund $32.5 million to consumers, while Google was forced to cough up $19 million in reimbursements.

The FTC set up a website where affected AT&T customers can apply for a refund.

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