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The feds are making AT&T pay $105 million for loading wireless bills with bogus charges

(Rick Wilking / Reuters)
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For the second time this year, federal regulators are targeting a major wireless network over allegations that it added bogus third-party charges to consumers' cellular bills.

On Wednesday, officials said AT&T would pay $105 million to settle accusations that from 2009 to January 2014, the firm charged consumers extra for spammy services they didn't ask for, such as monthly ringtone subscriptions and horoscope text messages. The action marks the largest in the history of the Federal Communications Commission and also involved officials at the Federal Trade Commission and the attorneys general of all 50 states.

"Today’s enforcement action is a victory for consumers nationwide,” FCC chairman Tom Wheeler said. “Carriers should be on notice that we will not tolerate any business practice that saddles consumers with unauthorized charges on their phone bills."

According to a federal complaint, AT&T placed unauthorized third-party charges on Americans' wireless bills under a category labeled "AT&T monthly subscriptions," which, said FTC chairwoman Edith Ramirez, led consumers to believe that they were being charged "for services provided by AT&T and not by third parties."

Despite receiving numerous complaints regarding the practice, Ramirez said, AT&T made "hundreds of millions of dollars" directly from the spam fees by taking "at least 35 percent" of every charge.

Of the $105 million fee, AT&T will pay $80 million to current and former customers who were affected by the unauthorized billing, also known in the industry as "mobile cramming." State governments will receive $20 million, and AT&T will pay a $5 million penalty to the U.S. Treasury.

Consumers who believe they were hit by cramming can go to the FTC's Web site to determine if they are eligible for a refund.

"While we had rigorous protections in place to guard consumers against unauthorized billing from these companies, last year we discontinued third-party billing for [premium text messaging] services," an AT&T spokesman said Wednesday. "This settlement gives our customers who believe they were wrongfully billed for [premium text messaging] services the ability to get a refund."

AT&T reported $18.5 billion in net income last year, according to the company's financial filings.

AT&T is not the first company to be investigated for mobile cramming, a practice that hits an estimated 20 million people annually and often without their knowledge. In 2012, Verizon settled a class-action cramming lawsuit that resulted in a full refund to affected consumers. More recently, both the FTC and the FCC have gone after T-Mobile for cramming.

Federal statistics show that only 1 in 20 victims of mobile cramming ever find out that they've been paying extra. That's because the recurring fees are relatively small — often amounting to $10 a month — and are easily overlooked. And the spammy services that charge consumers through the wireless provider are rarely transparent about their behavior. Analysts say that consumers can often wind up on the receiving end of cramming fees simply by giving out their phone number on an untrustworthy online form.

Speaking to reporters Wednesday, Wheeler hinted of more to come.

"There are a lot of companies" wrapped up in mobile cramming, said Wheeler. "Stay tuned about the other wireless providers."