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AT&T Mobility to Pay $105 Million in Mobile Cramming Settlement

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AT&T Mobility to Pay $105 Million in Mobile Cramming Settlement

Yesterday, Federal Trade Commission (FTC) Chairwoman Edith Ramirez, Federal Communications Commission (FCC) Chairman Tom Wheeler, and two state attorneys general representing all 50 states and the District of Columbia held a press conference to announce a significant enforcement action against AT&T Mobility for unlawfully billing customers for unauthorized third-party charges, also known as “cramming.”

At the press conference, the officials announced a $105 million settlement with AT&T to resolve state and federal mobile cramming investigations. AT&T will pay $80 million to the FTC, which will administer refunds to consumers, $20 million in penalties to the 50 states and DC, and $5 million in penalties to the FCC. This is the largest cramming settlement and largest FCC enforcement action in history.

The FTC alleged that, since at least 2009, AT&T has placed unauthorized third-party charges on consumers’ bills — usually something like $9.99 a month for third party ringtone and text message subscriptions. According to the FTC, AT&T had strong reason to suspect these charges were unauthorized, but continued to place them on bills. AT&T retained about 35% of every charge, refused to provide appropriate refunds to complaining consumers, and even reassured the third-party companies that AT&T would try to lower the amount paid in refunds. Bills were structured to make it hard to tell whether there was a reoccurring charge from a third-party company.

As part of the settlement, AT&T must notify current customers who may have been wrongly billed and must bolster its refund practices. In addition, AT&T must obtain a consumer’s express, informed consent before placing any third-party charges on a bill, must clearly and conspicuously disclose third-party charges on bills, and allow consumers to block third-party charges.

Arent Fox will continue to monitor the law as it relates to mobile cramming and third-party billing practices. Please contact Sarah L. Bruno or Adam D. Bowser with questions.

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