AT&T to pay $105 million to settle charges it 'crammed' phone bills

Wed Oct 8, 2014 3:05pm EDT
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By Diane Bartz and Alina Selyukh

WASHINGTON (Reuters) - AT&T Inc (T.N: Quote) will pay $105 million to settle allegations that it put unauthorized charges on customers' cell phone bills, a practice known as cramming, federal regulators said on Wednesday.

The settlement comes after years of complaints from cell phone owners about being charged for services like daily horoscopes or trivia that they never requested. It was negotiated by the Federal Trade Commission, the Federal Communications Commission and all state attorneys general.

AT&T will pay $80 million to refund customers while $20 million is earmarked for penalties and fees to all 50 U.S. states and Washington, said the FTC. The FCC also fined the company $5 million.

The FTC alleged that for companies whose billing was handled by AT&T, as many as 40 percent of subscribers complained about the charges.

"What’s shocking to me, as I thought about this particular settlement, is that we’re talking about reputable companies like AT&T and others. This isn’t, you know, Phil’s Phone Shack that’s doing this," said Maryland Attorney General Doug Gansler.

Prodded by state attorneys general, AT&T, T-Mobile US TMUS.N, Verizon (VZ.N: Quote) and Sprint (S.N: Quote) agreed in November to stop billing customers for such third-party services.

FCC Chairman Tom Wheeler estimated that 20 million consumers a year are crammed, and said other wireless providers were under scrutiny. "Stay tuned," said Wheeler, hinting of potential actions against other carriers.

AT&T said it had "rigorous protections" against unauthorized billing but it eventually scrapped what it called premium short messaging services, or PSMS.   Continued...

The AT&T logo is pictured by its store in Carlsbad, California, April 22, 2013.  REUTERS/Mike Blake