Class Action Case No. CV-09-1529 SI never went to court. The two sides – the Federal Trade Commission and AT&T – settled in October, 2014. AT&T, the largest mobile phone service provider in the nation, agreed to pay $105 million for unauthorized cell phone charges in a practice known as “mobile cramming.”
Cramming is when a phone company charges fees for services neither ordered nor requested by the customer. In AT&T’s case, mobile phone customers were charged up to $9.99 per month for third-party wallpapers, ringtones, horoscope text messages, celebrity gossip, and other crumbs of seemingly free information. In the industry, these are called “Premium SMS content.”
Monthly AT&T bills allegedly hid the charges as part of the total balance. They were listed under the nebulous category, “AT&T Monthly Subscriptions,” giving no hint of their third-party status. The Federal Trade Commission alleged that AT&T pocketed 35 percent of the third-party monthly charges.
“Mobile cramming is a major problem that continues to harm consumers in Massachusetts,” said Attorney General Martha Coakley. In 2011 alone, AT&T received approximately $1.3 million customer complaints about the extra fees. The company ended the practice in 2013.
Massachusetts received $327,000 as part of the case settlement. Under terms of the agreement, AT&T must open an $80 million fund, administered by the Federal Trade Commission, to refund customers who were targets of cramming. Customers can request free billing summaries from January 2005 to January 2013 to check for third-party charges, and they are eligible for 100 percent repayment.
“This case underscores the important fact that basic consumer protections – including that consumers should not be billed for charges they did not authorize — are fully applicable in the mobile environment,” said Federal Trade Commission Chairwoman Edith Ramirez.
AT&T is the first major phone service carrier to enter a national settlement involving mobile cramming practices. Negotiations with T-Mobile, Verizon and Sprint for alleged similar practices are ongoing.