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October 8, 2014

Miller, States and Federal Regulators Reach $105 Million "Mobile Cramming" Settlement with AT&T Mobility

Up to an estimated 200,000 Iowa current and former AT&T account holders eligible to receive refunds; AT&T to stop practices that enabled certain unauthorized charges to appear on wireless bills, add new customer protections

(DES MOINES, Iowa) AT&T Mobility LLC, the country’s second largest wireless carrier, will pay $80 million to consumers nationwide, stop practices that enabled certain unauthorized charges to appear on wireless phone bills, and add new customer protections as part of a $105 million settlement with Attorney General Tom Miller and all 50 states, the Federal Trade Commission and Federal Communications Commission.

The settlement resolves allegations that AT&T Mobility (AT&T), placed unauthorized charges for third-party services on consumers’ wireless phone bills, a practice known as “mobile cramming.”

Consumers who have been “crammed” often complain about charges, typically $9.99 per month, for so-called “premium” text message subscription services, also known as “PSMS” subscriptions.  The services include horoscopes, trivia, and sports scores that consumers did not request or knowingly authorize.  The charges are often disguised, appearing on wireless phone bills as something else, such as “data usage.”

“This will do a lot to resolve a widespread, frustrating fraud problem that Iowans have complained about for years,” Miller said.  “Third-party companies exploited a sneaky, back-door way onto AT&T’s wireless phone bills, and the company took a cut of it.  We’re pleased that we have resolved this with AT&T and look forward to reaching more settlements with other carriers,” Miller added.  “What’s most important is that we have put a stop to a persistent and unfair billing practice, and Iowans will rightly receive refunds.”

AT&T is the first mobile telephone provider to enter into national settlement to resolve allegations regarding cramming.  Last November, AT&T, Verizon, Sprint and T-Mobile announced that they would cease billing their customers for commercial PSMS charges.

Under the terms of the settlements, AT&T is required to pay $80 million for refunds to cramming victims.  The refunds, administered by the Federal Trade Commission, could affect up to 200,000 current and former AT&T account holders in Iowa.

Eligible Consumers Should File Claim
Beginning today, consumers can submit claims under the AT&T cramming refund program by visiting the claims website at www.ftc.gov/att.  If consumers are unsure about whether they are eligible for a refund, they can visit the claims website or contact the claims administrator at 1-877-819-9692 for more information.  Consumers have until May 1, 2015 to file a claim.

Settlement Terms
The settlement requires AT&T to stay out of the commercial PSMS business.

“While shutting down the premium text messaging services won’t stop all cramming complaints, we think it will stop the lion’s share,” Miller said.

Additional terms require AT&T to take a number of steps designed to ensure that it only bills consumers for third-party charges that have been authorized, including the following:

  • AT&T must obtain consumers’ express consent before billing consumers for third-party charges, and must ensure that consumers are only charged for services if the consumer has been informed of all material terms and conditions of their payment.
  • AT&T must provide a full refund or credit to consumers who are billed for unauthorized third-party charges at any time after this settlement.
  • AT&T must inform its customers when the consumers sign up for services that their mobile phone can be used to pay for third-party charges, and must inform consumers of how those third-party charges can be blocked if the consumer doesn’t want to use their phone as a payment method for third-party products.
  • AT&T must present third-party charges in a dedicated section of consumers’ mobile phone bills, must clearly distinguish them from AT&T’s charges, and must include in that same section information about the consumers’ ability to block third-party charges.

AT&T also agreed to pay $20 million to the state attorneys general, including $258,654 for the Iowa Consumer Education and Litigation Fund and consumer restitution, and $5 million to the Federal Communications Commission.

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