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AT&T 'Cramming' Settlement: $105M for Bogus Cell-Phone Charges

AT&T has agreed to a $105 million settlement with the Federal Trade Commission over claims that the carrier allegedly charged consumers for unauthorized third-party services and subscriptions through a process called "cramming."

The settlement is the largest to date in the FTC's effort to combat the practice of mobile cramming. Earlier this year, the FTC filed a complaint against T-Mobile alleging that carrier was cramming users' bills with unauthorized third-party charges as well.

What exactly is cramming, and what are the terms of AT&T's cramming settlement?

Common Cramming Charges Include Horoscopes, Trivia

AT&T and other carriers are accused of allowing third-party providers of text-message horoscopes, celebrity gossip, and trivia facts, among other services, to charge consumers up to $9.99 for subscriptions that were never authorized by the consumer. The charges would frequently go unnoticed, the FTC alleges, because AT&T made the monthly bills sent to consumers deceptively hard to read.

Consumers who did discover the charges complained in droves to the company. According to the FTC, in 2011 alone AT&T received more than 1.3 million calls to its customer service department regarding the charges. AT&T would frequently deny refunds to consumers who complained, or issue refunds for only two months' worth of charges no matter how long the consumer had been billed for the unauthorized service. In its complaint, the FTC alleged that AT&T kept at least 35 percent of the third-party charges imposed on its customers.

Terms of the Settlement

Under the proposed settlement, AT&T will pay $80 million to the FTC for consumer refunds for unlawfully billed charges. The settlement also includes $20 million in penalties to the states and the District of Columbia, along with a $5 million penalty to be paid to the FTC.

In addition, AT&T will now require consumer consent for third-party charges and will refund any charges for which it cannot show customer consent.

The FTC voted 5-0 to approve the settlement, which technically now awaits court approval. However, the Commission has already set up a website where current and former AT&T customers can apply for refunds. Claims must be submitted by May 1, 2015.

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