United States: AT&T Settles FTC Cramming Case For $80 Million In Consumer Refunds

Federal Trade Commission

Press Release – 10/8/14

FTC Complaint:

• This action stemmed from a Federal Trade Commission ("FTC") investigation into AT&T Inc.'s ("AT&T) billing practices.
• The FTC learned that AT&T had received a high volume of consumer complaints concerning unauthorized third-party charges placed on consumer phone bills.
• The complaint explained that AT&T billed its customers for hundreds of millions of dollars in charges that were originated by other companies, typically in amounts of $9.99 per month.
• AT&T typically retained at least 35% of the charges that it billed to customers.
• According to the complaint, in 2011, AT&T received more than 1.3 million calls to its customer service department challenging these charges.
• The FTC alleged that AT&T revised its refund policy in 2011, limiting consumer refunds to only two month's worth of charges, rather than three months, as had been its previous practice.
• Per AT&T, the change in company policy was implemented in order to "help lower refunds."
• The complaint further alleged that AT&T did not seek to determine whether third parties had secured proper authorization from consumers for the specific charges before they were placed on consumer bills.
• The FTC also alleged that AT&T denied refunds to consumers and, in some cases, referred these consumers to third parties to seek refunds for money they had already paid to AT&T.
• Additionally, the FTC pointed out that AT&T's billing format added to the problem by making it difficult for consumers to understand that third-party charges were placed on their bills.
• For instance, in many instances consumer bills reflected the amount due and due date, with no mention that the amount included charges placed on the bills by a third party.
• Finally, the complaint alleged that the subject fees were listed as "AT&T Monthly Subscriptions" – leading consumers to believe that the charges were AT&T-provided services.

Settlement:

• AT&T will pay $80 million to the FTC to provide refunds to affected consumers for billing them for allegedly unauthorized third-party charges.
• AT&T must notify all of its current customers who were billed for these third-party charges of the existence of the settlement and the refund program by text message, email, paper bill insert and notification through online billing.
• On a going-forward basis, AT&T will be required to obtain consumers' express, informed consent before placing any third party charges on consumer mobile phone bills.
• In addition, the company must clearly disclose any third-party charges on consumer bills and provide consumers with the option to block third-party charges from being placed on their bills.

Take Away:

• This action was part of a multi-agency settlement: AT&T has also agreed to pay $20 million in penalties and fees to 50 states and the District of Columbia, as well as a $5 million penalty to the Federal Communications Commission.
• If you advertise or otherwise engage in mobile billing, it is imperative that you comply with applicable state and federal laws or risk fines and forfeiture penalties.

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