Not all AT&T customers looking for a refund on unwanted text messages will get every dollar back.
More than 3 million current and former customers have applied for refunds as part of a settlement with the Federal Trade Commission over fraudulent "cramming" charges on AT&T customer phone bills. Third parties had used the carrier's premium text-messaging service, which AT&T then charged to its customers.
But the sheer number of claims could outstrip the, according to the FTC. This means some customers may end up getting a fraction of what they're owed as the FTC works through the applications for refunds.
AT&T, the nation's second-largest wireless carrier, was the first of the four major wireless phone companies to settle with federal regulators and reimburse customers for cramming. The government has reached settlements with T-Mobile, Verizon and Sprint totaling $353 million in penalties and restitution; $267.5 million of that total is to be returned to affected customers.
Whether customers get a full refund will largely depend on which carrier they subscribe to, since each settlement was different, according to the FTC.
AT&T said the amount customers receive is up to the FTC, which is administering the distribution of the funds.
"We reached a comprehensive settlement with the FTC and other agencies," a spokesman said in an email. "As a part of this settlement, the FTC controls the claims process, including determining who is eligible and how best to distribute the funds."
The FTC said it's still determining how many of the 3 million claims it's received warrant a refund, and said it's doubtful AT&T's $80 million settlement will cover the full refunds.
What is cramming?
Cramming occurs when third-party companies charge customers for services, such as text messages containing daily horoscopes or ringtones, without customers' knowledge or consent. The charge shows up on phone bills, often buried pages deep, making it difficult to find. In the most recent suits filed against the phone companies, these charges came from premium SMS text-messaging services. All four of the major carriers have since eliminated premium SMS services. But the settlements against the companies also cover future third-party charges that could end up on customer phone bills, such as services within applications on smartphones.
Three federal agencies that share jurisdiction over the wireless phone companies and their business practices went after the four major wireless companies for allowing such practices. The FTC and Federal Communications Commission worked on cases against AT&T and T-Mobile, while the FCC teamed up with the Consumer Financial Protection Bureau to go after Sprint and Verizon.
While the wireless carriers did not directly sell these premium SMS services to consumers, the government alleged they didn't adequately supervise third parties or require a separate credit card authorization. By allowing third parties to charge customers through their wireless bills, the carriers opened the gates to abuse and scams.
In exchange for providing access to its billing, carriers reaped between 30 percent and 40 percent of the charges, some of which were as much as $9.99 to $14.99 a month. The government agencies that brought suit against the phone companies estimate that American wireless consumers have been scammed out of hundreds of millions of dollars.
Under its $105 million settlement, AT&T was required to pay $80 million to the FTC, which it will use to refund victims of the unauthorized charges. AT&T is also required to pay $20 million in penalties to 50 states and Washington, DC, as well as a $5 million penalty to the FCC.
Other carrier settlements
Customers of T-Mobile should expect full refunds. Under the terms of its deal with the FTC, T-Mobilefor cramming. If that amount doesn't cover everything, T-Mobile will pay the FTC the difference, so the agency can redress additional consumer complaints.
T-Mobile is administering the refunds itself and there is no cap on how much money it will spend to reimburse customers, according to the terms of its settlement with the FTC. The deadline for T-Mobile customers to file for reimbursement is June 30. Customers can find out more about whether they qualify for a refund on T-Mobile's website. T-Mobile is also required to pay $18 million in fines to all 50 states and Washington, DC, as well as a $4.5 million fine to the FCC.
The Consumer Financial Protection Bureau, which also has authority over companies processing payments, led the cases against Sprint and Verizon. It announced last week that Verizon and Sprint will pay a combined $158 million to settle claims that they allowed bogus charges on customer bills. Verizon will pay $90 million, of which $70 million will go to pay back customers, and Sprint will pay $68 million, $50 million of which will be returned to customers. As with the AT&T deal, the fund has a cap -- meaning consumers will get a reduced share if refund requests exceed the allotment, said a CFPB spokeswoman.
Sprint and Verizon have each stated publicly that they will inform individual customers they suspect were affected.
Both companies have also said they've already been reimbursing customers for suspected fraudulent third-party charges. Sprint put its number of refunds in the "tens of millions of dollars long before the government initiated its investigation of our industry," a spokeswoman said in a statement.
Customers will only be refunded money spent on the third-party payments. If the fund set aside for reimbursement exceeds the customer claims for refunds, the remaining money will be paid to the CFPB, the agency's spokeswoman said.
The deadline to apply for refunds from Sprint or Verizon is December 31. The CFPB is handling claims for Verizon customers who were affected by the scams. Verizon customers can submit claims for refunds at www.CFPBSettlementVerizon.com or can learn more information about the Verizon settlement by calling 888-726-7063. Sprint customers can submit claims for refunds at www.SprintRefundPSMS.com or can learn more information about the Sprint settlement by calling 877-389-8787.