We’re not saying it’s the most important phone message since “Mr. Watson, come here. I want to see you.” But the FTC hopes a $105 million settlement with AT&T Mobility stemming from unauthorized charges on consumers’ mobile phone bills will motivate industry members to listen up.
The AT&T case is the latest salvo in the battle against mobile cramming. It’s part of a united front forged by the FTC, the FCC, and a coalition of 51 state Attorneys General.
According to the FTC’s complaint, companies signed consumers up without their express consent for text message services offering trivia, ringtones, flirting tips, celebrity gossip, and the like. Industry insiders refer to them as Premium SMS charges, but thousands of consumers called the monthly $9.99 fees unapproved, unauthorized, and flat-out annoying. AT&T wasn’t the one serving up the flirting advice, but it billed consumers for the services and pocketed a cool 35-40% of the take.
What’s more, the FTC complaint alleges that AT&T took steps to keep consumers in the dark about what was going on, making it tough for them to challenge the unauthorized charges. The company’s bills clearly listed the bottom-line total supposedly owed each month, but consumers were hard-pressed to locate and identify the unapproved fees. For example, hard copies of bills hid them in a category called “AT&T Monthly Subscriptions,” despite the fact that the charges were placed by third-party content providers.
Even if consumers were able to decipher their bills, the FTC says AT&T looked the other way as complaints mounted. In 2011 alone, the company got over 1.3 million calls to its customer service department complaining about third-party subscription charges. And it wasn’t just consumers clamoring for the company to cut out the cramming. The lawsuit cites an in-house email in which an employee stated that “Cramming/Spamming has increased to a new level that cannot be tolerated from an AT&T or industry perspective.” But tolerate it AT&T did, even as industry auditor alerts, law enforcement agencies, and others joined consumers in urging the company to rethink the role it was playing in the unauthorized – and illegal – charges.
The FTC says AT&T compounded the harm to consumers by setting up roadblocks to refunds. When people complained, AT&T told some of them there was nothing it could do. In other cases, AT&T put the onus on consumers, telling them to take it up with the third party sending the unwanted content. But good luck with that, given that in many instances, AT&T failed to give people accurate information on how to reach them. Others were offered a take-it-or-leave it token refund of two months of charges even though AT&T had billed them for a year or more.
All the while, AT&T continued to pocket its hefty percentage even from content providers that racked up astronomically high complaint and refund numbers. One telling comparison, according to the FTC: how AT&T rebuffed consumers who tried to get refunds vs. how the company bent over backwards to maintain lucrative business relationships with crammers through an ineffective “three strikes” policy.
The complaint alleges that AT&T’s billing practices were deceptive and unfair. The settlement requires AT&T to ensure from here on in that consumers give their consent before being billed for third-party charges. When consumers contact AT&T about unauthorized third-party charges, the company will have to provide a refund unless it can show the consumer consented to the charge in the first place. What about telling people to hunt down the third-party subscription services on their own to get a refund? That practice has to stop. AT&T also has agreed to continue to offer consumers the option to block all third-party charges.
Of the $105 million total financial settlement, $80 million will go to the FTC to use for consumer refunds, $20 million will be paid in penalties and fees to the state AGs, and $5 million will go in penalties to the FCC. For current customers billed for unauthorized third-party charges, AT&T must notify them of the settlement and refund program by text, email, paper bill insert, and notification on an online bill. Former customers may be contacted by the FTC’s refund administrator. Consumers can visit the FTC's refund page for more information.
What’s the message for other marketers?
First, consumers shouldn’t need Sudoku-like skills to figure out their bills. It’s a basic principle of customer service – oh, yeah, and it’s the law – that a business needs to explain what consumers owe in a truthful fashion. A related tenet we’ve repeated so often we should design a macro by now: It’s illegal to bill people without their express consent.
Second, the FTC looks carefully at how companies respond when consumers come forward with a legitimate beef. People shouldn’t have to jump through hoops to vindicate their rights. If you haven’t taken a look at your procedures recently, maybe now is the time.