AT&T to pay $119m to settle 'cramming' allegations

AT&T will pay US$105 million (A$119 million) to settle allegations that it 'crammed' or put unauthorised charges on customers' mobile phone bills.

The settlement comes after years of complaints from mobile phone owners about being charged for services like daily horoscopes or trivia that they never requested. It was negotiated by the US Federal Trade Commission, the Federal Communications Commission and all state attorneys general.

AT&T will pay US$80 million to refund customers while US$20 million is earmarked for penalties and fees to all 50 US states and Washington, the FTC said. The FCC also fined the company US$5 million.

The FTC alleged that for companies whose billing was handled by AT&T, as many as 40 percent of subscribers complained about the charges.

"What’s shocking to me, as I thought about this particular settlement, is that we’re talking about reputable companies like AT&T and others. This isn’t, you know, Phil’s Phone Shack that’s doing this," Maryland Attorney General Doug Gansler said.

Prodded by state attorneys general, AT&T, T-Mobile, Verizon and Sprint agreed in November to stop billing customers for such third-party services.

FCC Chairman Tom Wheeler estimated that 20 million consumers a year are crammed, and said other wireless providers were under scrutiny. He hinted at potential actions against other carriers.

AT&T said it had "rigorous protections" against unauthorised billing but it eventually scrapped what it called premium short messaging services, or PSMS.

"We reached a broad settlement to resolve claims that some of our wireless customers were billed for charges from third-parties that the customers did not authorise. This settlement gives our customers who believe they were wrongfully billed for PSMS the ability to get a refund," an AT&T spokesman said in a statement.

FTC Chairwoman Edith Ramirez said consumers were often hit with US$9.99 charges lumped together into "AT&T monthly subscriptions" on their bills.

When customers protested, Ramirez said, "Instead of acting to stop the charges, AT&T continued to make hundreds of millions of dollars from the practice by taking at least 35 percent of every charge and refused to provide refunds to many consumers."

The FTC has also moved against smaller companies which originate the charges.

In July, the FTC filed a complaint against T-Mobile USA, accusing the wireless provider of cramming. The commission asked the court to order T-Mobile US, the fourth-largest US mobile phone provider by number of customers, to stop mobile cramming, provide refunds and give up revenues from the practice.

The FCC is also investigating T-Mobile US for cramming.