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AT&T Slammed on Cramming

AT&T Mobility will have to pay back $80 million to customers for unauthorized charges related to Premium Short Messaging Services.

In the largest regulatory fine ever handed down by the FCC, AT&T Mobility will have to pay back $80 million to customers for unauthorized charges on their wireless bills, and an additional $25 million in penalties, for a total settlement of $105 million. Those charges were for third-party Premium Short Message Services (PSMS) that included such things as monthly subscriptions for ringtones, wallpapers, and text messages providing horoscopes, flirting tips, celebrity gossip, and other frivolous content. The typical charge for these types of subscriptions was $9.99 per month.

Going forward, the Consent Decree will prohibit AT&T Mobility from charging customers for third-party PSMS products or services, and require the company to implement a system for verifying those third-party charges that ensures the consumer's express informed consent was received prior to any charges being placed on their bills. AT&T Mobility will have to block third-party charges for free when a customer requests it, and help customers identify unwanted charges by including clear descriptions of all such charges in a dedicated section on customer bills.

AT&T had actually received 1.3 million complaints from customers about unauthorized charges in 2011 alone. Many alleged that when they contacted AT&T, the company could not provide documentation of authorization for the disputed charges, and others complained that the company either refused a refund of the disputed charges or would only refund one or two months of the "service." I had actually written a blog post back in 2011 railing against the bogus charges on my AT&T bill--I wonder what my cut of the $80 million will be?

One key piece of information that was not included in the Consent Decree was what "cut of the action" AT&T Mobility received. Clearly the company was not providing billing services for these "bottom feeders" out of the goodness of its heart, and it would be interesting to know if they came out ahead even after the $105 million settlement.

What I always find depressing about these sorts of stories is the amount of time that goes by before our regulators get around to doing something about it.

This however is the second such order the FCC's enforcement bureau has handed down this week, the other being a $60 million fine to Marriott Hotel Services for blocking users' access to their personal hot spots in its meeting rooms and convention centers. Both actions were signed by Travis LeBlanc, who was appointed acting Chief of the Enforcement Bureau by FCC Chairman Tom Wheeler in March of this year. Mr. LeBlanc has quite the pedigree, with an undergraduate degree from Princeton, a J.D. from Yale Law, and a Masters in Public Affairs from the John F. Kennedy School of Government at Harvard.

So one dirty practice in the communications business has been squashed, but I'm afraid it won't be the last.

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