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Post date: October 8 2014

A.G. Schneiderman Announces $105 Million National 'Cramming' Settlement With AT&T Mobility

Settlement Requires AT&T Mobility To Reform Business Practices, Provides Consumer Relief, And Secures $572,970.60 For New York State

NEW YORK – Attorney General Eric T. Schneiderman today announced that his office, along with the Attorneys General of 49 other states and the District of Columbia, the Federal Trade Commission, and the Federal Communications Commission, reached a $105 million settlement with AT&T Mobility LLC. The settlement resolves allegations that AT&T Mobility placed on consumers’ mobile telephone bills charges for third-party services that had not been authorized by consumers, a practice known as “cramming.” One common cramming charge is a $9.99-per-month premium text message subscription service (also known as PSMS) for horoscopes, trivia, and sports scores that consumers often never requested.

“No one is above the law, including powerful multinational corporations, and I am pleased today’s settlement with AT&T Mobility protects consumers against being billed for services they did not request,” said Attorney General Schneiderman. “Illegal cramming raises cell phone bills for consumers and picks the pockets of ordinary New Yorkers.”

The Attorneys General and federal regulators allege that cramming occurred when AT&T Mobility placed charges on consumers’ mobile telephone bills for text-based services—provided not by AT&T, but by an independent third party—without consumers’ knowledge or consent.  AT&T Mobility is the first mobile telephone provider to enter into a national settlement to resolve allegations regarding cramming; AT&T Mobility was among the four major mobile carriers—in addition to Verizon, Sprint and T-Mobile—that announced it would cease billing customers for PSMS last fall.

The settlement requires AT&T Mobility to pay $20 million to states and the District of Columbia, including $572,960.6o to the State of New York, $80 million to the Federal Trade Commission to pay restitution to consumers, including New York consumers, who were charged for third-party services they did not authorize, and $5 million in penalties and legal costs to the Federal Communications Commission. The settlement also requires AT&T Mobility to take steps designed to ensure that it bills consumers only for third-party charges that have been authorized, including the following:

  • AT&T Mobility must obtain consumers’ express consent before billing for third-party charges and must ensure that consumers are  charged for services only if they have been informed of all material terms and conditions of payment;
  • AT&T Mobility 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 Mobility must inform its customers when they sign up for services that their mobile phone can be used to pay for third-party charges, and the company must inform consumers about how to block those charges; and
  • AT&T Mobility must present third-party charges in a dedicated section of consumers’ mobile phone bills, must clearly distinguish them from AT&T Mobility’s charges, and must include in that same section information about consumers’ ability to block third-party charges.

AT&T customers who believe they were billed for third party charges that they did not authorize can file a claim at ftc.gov/att through May 1, 2015.

This case was handled by Assistant Attorneys General Kate Matuschak and Jeanna Hussey of the Consumer Frauds and Protection Bureau. The Consumer Frauds and Protection Bureau is led by Bureau Chief Jane Azia. The Consumer Frauds and Protection Bureau is part of the Division of Economic Justice led by Executive Deputy Attorney General for Economic Justice Karla Sanchez.