AT&T gets $105 million wake-up call about mobile cramming

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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.

 

Comments

I had a very complicated situation involving long distance charges on a land line from a small local exchange that used AT&T as the long distance carrier. To make a long story short, AT&T promised to forgive the charges if I got a letter from the local carrier explaining the mistake. I got the letter and sent it to AT&T but they refused to honor their promise. I have already dropped them as the carrier for long distance. I plan to switch my cell service away from AT&T. I tried to explain to them that they were going to lose over $200.00 per month over a $53.00 issue. They flat out lied to me. For me it is Adios AT&T- Hello Verizon.
I thought AT&T didn't value their employees since they've been offshoring 200-300 jobs a week for the past 3 years. And then trying to hire local contractors at 1/3 less than they were paying with no benefits. Now I see that they don't value their customers either. Not that they ever did, but they should start since they have competition.
Does anyone know if the FTC is planning to do the same with other carriers? During a rough employment period about 6-7 years ago, I worked at a VERIZON customer service call center for almost a year. I took dozens of phone calls every day from very pissed off people who had signed up (or their uninformed teenage kids) for these Premium SMS Text "services." So, I know it's not just AT&T....
I got a Bill yesterday for my son's cell ph for $186.17. He was supposed to be added to my family plan @$9.99 a mo. Spent over 3 hrs, talked to 6 different people!!! All were nice, but I still wound up having to fork over$106.17!! The man who transferred his service did not mention a reconnect charge or tell me it would be $20 + tax. I am 75 and my grandmother was night chief long distance operator for 21 yrs. So I have been with SOUTH CENTRAL BELL (and all it's other names) for a LOOOONG time. This kind of treatment would have had her at their main office pounding on the counter. Thank you.FTC & FCC . POUND A LITTLE HARDER.12910
I think I'm charged unfairly anyways. I think it's a joke when all I wanted to do is swap info from phone to phone and found out I'm being charged for a 6gb plan when all I was receiving was 4gb. When was att going to tell me? Probably never. Now that's unfair. I've been a customer for 17 years. If there is a refund I should definitely get it.
To add to this story about AT&T its not just about the phone service. I am a retired AT%T employee. When a retiree becomes medicare eligible we are dropped from the healthcare plan that has historically been a benefit until death. AT&T has been the backup plan behind medicare. No more! It would be fair to say that they do have a medical reimbursement account fund currently where they put in a certain amount that does help. But, if we want a plan to really cover the unexpected we have to buy that. Also, we have not seen COLA or any change to our meager pension in the 16 years I have been gone from them. They honestly just don't care about customers or employees. I hope things change before they dissolve to protect the pensions of the multiple thousands who used to be proud to be an AT&T employee when they got the job done.
Is there any reprieve for Business phone over charges? I spend hours every other month arguing with AT&T over being slammed with unauthorized charges?
The rules about "roaming" and "airplane mode" and traveling abroad have never been explained, and when I do go abroad, I come back to a bill that is humongous.
AT&T has been outsourcing jobs for over a decade. I worked at an AT&T call center for over 8 years and was laid off in 2005 so that they could ship my job overseas. They do not care about customer service. Sales are the ONLY thing that matters to them. They were that way 10 years ago and they haven't changed!
You are correct. I went the same thing for several years. First, being laid off or bumped due to no seniority, then working in sales jobs with impossible standards. I will admit sales wasn't my strong suit so it was best I left the company.
I think you should reword your comment to say that the only thing that matters to ANY cell phone company is sales. The bottom line is that they're all in it for a profit, and underhanded tactics like the one's AT&T used are not uncommon. I worked for Sprint where we were trained tell customers we were going to add a service onto their account that they wouldn't be charged for (until a month later after they'd forgotten about it... but we of course were told to withhold that last bit). Companies count on customers not scrutinizing their bills. I am glad that something is finally being done about these underhanded tactics.
I want to know when we start getting refunds????
Hi Lesley. Thanks for the wonderful article. I was one of the folks that caught this AT&T sponsored scam back in 2010 or so. I found two monthly charges of 9.95 on my prepaid bill. When I confronted AT&T on how unethical and illegal it was (or should have been), I was laughed at and told that the burden was on me to check my texts and bill! I asked what if someone had kept their phone off for a while or blocked texts, and one of these 3rd parties started these lovely "subscriptions" without his knowledge? He really didn't have an answer except to say that the customer has 30 days to call for a refund and reply "stop". He was only going to refund one month, but I kept talking and reasoning with him until he refunded me both months of charges. He acted like he was doing me a favor, insinuating it was my fault. Sometime later, AT&T switched to overseas customer service and they actually are a lot more helpful and much less condescending. I also had them put Purchase Blocker on all of our AT&T accounts. All in all, I hate it that AT&T waited until they had no other choice because they were being pressured by the government to do the right thing and make amends with the customer. The execs responsible for these dishonest decisions need to be fired and the company purged from these money grubbing hounds! AT&T should be ashamed.
i pay almost $1500 in 2012 when we went to Europe. The rules about "roaming" and "airplane mode" and traveling abroad have never been explained, and when I do go abroad, I come back to a bill that is humongous and I almost cried.
Anyone who hasn't lived under a rock KNOWS you will THOUSANDS in cell phone bills if u travel w/o an internationalal plan. That's not att being deceptive. That's a STUPID customer. Just think how much you PAY for international calls. Now take your phone aboard. It's logical you will pay MORE. This has been no secret since the last decade and have NOTHING to do with this lawsuit
Aww D: I Hope that never happens to you again.

That would be the customer's responsibility. That is not a deceptive practice like the charges in this case.

I haven't made the changes 2 the account
I have paid over $17,000.00 in phone charges over the last 15 year period I've been paying for my cell phone bills... Including a phone I sent back once that was giving me all kinds of problems, after days of walking me through tests over the phone, driving 45 miles one way to my nearest ATT store, with no result or it fixed, they decide to tell me it was covered by warranty, and I thought it was covered on my insurance, until they told me no you don't have insurance... I'm like, ah... WHAT!? I always had and have insurance on all of my devices, on every line I've ever had on my contracts... Even with the insanely high $199.99 deductible (I've paid a few of those too) you have to pay in addition to the $9.99 every month to have even have the insurance.. For 15 years straight, with at times up to 4 phones at once, I always had insurance, sometimes needed it, sometimes not, ranging from using both of my again "refurbished" replacements you're allowed, to never making an insurance claim in 5 years straight and still paid that $9.99 every month, so then I run in to an issue with them and they wouldn't so much as budge on any of the charges, very upsetting when I added all my bills up an I couldn't believe that with all the money I had paid, they wouldn't even help me... So after sending the phone back, I got my "refurbished" replacement device, and a month or so later I get my bill on average, $260.00 a month with a lovely all at once $600.00 charge, cause they said it didn't meet their standards when they received the phone i sent back in... I was unemployed at the time, to add insult to injury, what a shame to take advantage like that.. I filed a claim, it will be nice to see them finally acknowledging the charges thing as well, unfortunately that has happened to me many times also... These big phone companies are making it hard stay with them when companies like straight talk, net 10, etc are just getting bigger and better every day.. Hope to see some improvement from now on.. Something as simple as charging full price like that for sending a refurbished device back to the customer, is just wrong.
I've been a loyal customer for more than 15 years, but the slow elimination of any differing options on the wireless plans have made it frustrating being a customer. Now the craziest of them all, if you upgrade to the new iPhone 6 you now have a $15 increase in your bill. Why?
I bought a brand new phone from AT&T in May 2014...with insurance. I lost the phone a week later. When I filed a claim..I put $199 deductible and was sent a refurbished phone. Two weeks later that phone filled up black goo...no one could explain what it was or why it occurred. At&t Sent another phone and it was used. I RETURNED BOTH PHONES... one by U S mail....one by UPS...per their instructions. They had no record of one return and charged The cost of the Samsung Note 3 to my bill... $647. 00. Said when they find the phone they will refund the money. It took 4 months to find the mistake and they did not return my money but, credited the bill. I am totally disgusted. They blatantly lied...I hope we get our returns due. I'm still recovering.... $647.00...unplanned is horrible. Thanks for allowing me to vent.

What a topical company, putting blame on their costumers, and telling them it's their fault, and there's nothing they can do about it. About time the ftc and fcc put it to the companies. Grateful, now just keep it up. Thanks

It's about time these phone companies got what was coming to them. Charging their costumers, and when something isn't right tells them there's nothing they can do. Puts the blame on the costumer, when they no they've charged more then they should, great job to the ftc and the fcc, but hopefully they go after other companies for us costumers, and maybe these companies will get the point. Don't stick it to your costumers. Thanks again ftc and fcc.

When do we get refund?

I'm very happy with AT&T

I was concerned when I bought my first iPhone. In those days the only carrier for the iPhone was AT&T. I had heard such horrible things about the company. I was dreading dealing with them. It turned out they have been one of the best companies to deal with. The wait times to speak with a representative have been reasonable, the employees pleasant to deal with and always helpful. I have no complaints. I have stuck with them even though I now have many choices. My old carrier, Sprint, was a nightmare. Consistently overcharging, incredibly long wait times. Employees that were rude and would hang up on me if I tried to get my erroneous charges refunded. I don't understand all the complaining about AT&T v

You don't understand all the complaining because you are of the fortunate few who either never ran into problems, or never noticed you were being lied to or misled. There are many people, like myself, who have had many long hold times, rude customer service reps, and constant "forwarding" until you are disconnected. We also were lied to and tricked into giving up our "old" family plans that we could have kept indefinitely and were cheaper monthly bills that we could afford. When you have a family of 4-5 cell phones, it quickly becomes an unaffordable luxury. People with individual plans, or with only 1-2 phones on their bill probably wouldn't ever see how the recent changes hurt families. Families that don't select to have all their devices use DATA too, like laptops, etc. Families that only want their kids to have access through their phones - period. I noticed a new "spin" happening to make you pay full price for your upgrades rather than just honestly admitting they now needed to recoup that price and would no longer give away phones cheaply. Then when I questioned their misleading way of doing that, they turned into a Nazi regime and refused to see my perspective and kept lying, and all the bad service phone calls began. Then I was directly lied to and lost my old plan and they refused to put me back on it 24 hours later when I connected the dots and figured it out. My old service plan I could afford - $175/mo. Every single new plan, except for "bring your own", would cost me $338/mo. Thats a BIG increase and an undoable monthly bill for a struggling family of five. They told me I could add all our other devices too to make it "worth it". Actually, that increases the bill more - and I can't afford that so it is NOT worth it.

If they had just been open and honest with their business practice - changed their plans, were direct and honest about how it affected your monthly bill over the first two years, admitted they were never going to sell phones cheaply anymore, and gave no options for a cheaper way, I could not have complained. It's their company and they can change their plans any time they want. It's the dishonesty, spinning words, and outright lying that lost them my loyalty after so many years. You are lucky to have not experienced this. Please don't discount those of us who have.

What about when we signed a contract to get unlimited data and AT&T just decided to just stop giving it to us that was really wrong... I have very stron concerns shot that !!!!

How do corporate customers obtain a refund for large consolidated accounts?

And they (AT&T) are back at it again regarding phone upgrades. Whereas in the past, if you purchase a phone from their website, it would cost $99 w/2 year agreement. Not Now, I ve had to pay these extortionists in excess of $200 for the past 3 months until I find the person who can explain or prove I agreed to this, when I could have bought the phone on eBay & had no contract.

Well, now that that's sorted, let's see what we can do to make AT&T and Verizon truly honor those unlimited data plans.

For AT&T this settlement is just a cost of doing business. It is well calculated risk/benefit model of making money. Its too big to fail and too big to jail. At the end the consumer will foot the bill with another scam or higher fees for everyone. Really sad

How do we find out if we do get a refund. I applied but it doesn't say aSnothing anout finding out if I qualify and jow I would get it.

Att charge me 30.00 each time a got a new phone. I new they were overcharging me but, they come up with some BS about this is a one time charge plus all these city, state, county and so many other charges that the state ,And 3rd party people have made off me, when tihis contract runs out so will. I will be trying to go to Safe Linc if I am able to, this senior has paid For ATT over 15years to much MONEY.

how do I see if I am qualify for refund? I have no bills that far back.

How do I check on the status of my refund?

How will I be refunded?

I was always super busy taking care of my sick husband and mother-in-law that I didn't always check out my bill and what I had been paying out though I always paid my bill early. When my husband passed in 2007 and I was getting everything in order was when I started to read my bills and the content of those bills. I did see a charge on it so I called to ask what it was. It was one of those third party charges. I said, "I never even heard of them and I didn't consent to this." They said (daughters name) agreed to this. They said she was on that site on the computer and agreed when she opened that page. I said she may not have understood what she was going into on the computer and that the pop ups sometime won't let you out until you push on the right button even though you push to exit out the same page pops up. They told me they couldn't do anything about that but switched gears and I told them my daughter isn't even eighteen and besides that you can't change anything on my bill because I am the one listed for making changes on my bill only so what you did was wrong. The person then told me to wait a minute and looked at all my bills and it was quite a bit of money that they owed me back. They did reimburse me but, the person had the nerve to say.. Tell your daughter to be more careful what she clicks on. They need to pay more attention to who is listed on the bills to make changes and not.

A great example of effective work by a government agency. If certain people had their way in this society, AT&T could do whatever they want. Government is a legitimate branch of a capitalist democracy and it provides checks and balances on a free market system that would otherwise be out of control and merciless. The private citizen would be without defense.

The next plan is my worst nightmare. AT&T estimates your data usage. Their estimate is way to low. When your date is used it they automatically add data at the rate of $15. per gig. I was assured my bill would be much lower. I called and had my data increased according to what we used the previous month. Same thing. A message that my data is low. I was told by phone conversation with a representative that I could switch back any time I wanted to. Well guess what. After a couple of automatic dada increases I went to the store to change back. I was too late. I only had two weeks to change my mind. It had been less than a month. So I called and was told I can change back to contract but, and a big but, I have to pay off the $700 balance on the purchase of my phone first. I don't have $700. just lying around. Now I'm stuck with this plan and AT&T adding and charging whatever they see fit each month. I've been with AT&T long before it was AT&T, about 18 years. I have sung their praises to all my Verizon friends about how much more service I have.

Please add me to the settlement . I also have been charged for things that I didn't Arthorize on my acct.

How can I track the progress of my refund settlement?

I been with AT&T since it was Cingular, my bill been going up for the longest, it has to stop.

How do I know if I am eligible for this class action suit?

AT&T has billed me for unused data and only reimbursed me for two months worth. They have penny-nickeled-dimed me for God only knows how long. I caught them on this when they billed data on my husband's line, whereas he doesn't (and can't) use it on his generic phone in the first place. They resolved the issue by blocking all data on it, but that's only because I called them on it. Keep an eye on data used everyone!

How can we check the status of this settlement?

This happened to me with two different unauthorized third party mobile subscriptions on my wife's line. Never affected my line since i had an iPhone my entire time on AT&T. She started with a non-Android/non-iPhone smartphone before she switched to an iPhone. They charged us for Mobile TV ($10.69) and E-mail ($5.35) month after month since 2011 even though she switched to an iPhone the end of 2012 and those those mobile subscriptions don't even work with iPhone. They credited me for 3 months since that was "all they could do" and told me to contact FTC. Never received a text or e-mail these recurring monthly charges (unauthorized and unused) except for one text message yesterday.

ATT makes it difficult to understand their charges and even harder to correct them. I have done business with them over 30 years, corporately and as a consumer, with cell, land line and internet, and it makes no difference. It really amounts to a criminal enterprise because anyone else acting similarly would be indicted for fraudulent business practices. They make it impossible to talk with anyone beyond minimum wage or offshore call centers. Management should be required to be available and accountable to customers. FTC settlement is nice but it is way too low. With tens of billions in revenue each year, ATT likely benefited far more than what this settlement is for. I have complained to the FCC previously and they are nothing more than a mouthpiece for ATT. They just refer your complaint to ATT and then tell you ATT says there is no problem without any investigation or questioning. ATT is always right, consumer always wrong. FTC and FCC need to be far more aggressive as ATT just considers these low settlements a cost of doing business. Bad practices will continue. FTC really needs to break up the company again as phone and internet are not competitive with just 2 to 4 carriers at most. Its why service sucks - no competitive pressure to make it better after 30+ years since the original antitrust breakup in 1984. Almost all the original breakout companies are now back as one so what did that accomplish? Nothing, except they are less regulated and still a near-monopoly. We can see whose got the ear of Uncle Sam!

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