The Federal Trade Commission notched a win for consumers on Wednesday when it announced a $105 million “cramming” settlement with AT&T. The fine is notable for a few reasons: It’s the biggest one the FTC has ever made with a major mobile carrier, and, more importantly, $80 million of it will go to refunding customers who were taken advantage of in the first place.
“Cramming” is what regulators use to describe the illegal practice of stuffing extraneous charges—typically from unauthorized third parties—into customers’ bills. These charges are often buried deep in the bill or given vague, deceptive labels such as “service fee” or “other fees” so as not to arouse suspicion. Cramming predates smartphones, but those users are especially vulnerable to it since they tend to make more purchases that unauthorized line items can hide behind. The FTC demonstrates this with an infographic containing “excerpts from an actual AT&T bill.”
Pretty much everyone agrees that cramming is a big problem. In a report released in July, the Senate Committee on Commerce, Science, and Transportation said cramming was a billion-dollar industry that costs consumers millions each year. At the same time, cramming bolsters revenue for AT&T, Sprint, T-Mobile, and Verizon, as carriers often retain 30 to 40 percent of third-party charges. Earlier that month, the FTC filed a formal complaint against T-Mobile that accused it of reaping hundreds of millions of dollars from phony charges buried in customers’ cellphone bills. The FTC says it has pursued seven cases again mobile cramming since 2013.
The FTC is instructing consumers who believe they were charged unfairly by AT&T to submit a refund claim online. As part of its settlement, AT&T is also supposed to notify all current customers who were affected of the deal and the refund program. In other news, trivia text alerts just lost a lot of unwitting but well-paying customers.