Breaking Down The Ringtone Settlement
Last week we told you about ringtone fraud - in which cell phone customers are automatically subscribed without their knowledge to monthly charges that go on forever. Today, AT&T agreed to settle major fraud charges related to allegations of widespread ringtone fraud, and new cases are being built against Verizon and other cell phone carriers. CBS News investigative correspondent Sharyl Attkisson has a follow-up report.
AT&T Wireless is the first big phone company to settle a ringtone-fraud investigation - where AT&T allowed advertisers to put out misleading ads, then billed customers for ringtones they didn't want or thought were free.
Under the settlement, AT&T agrees to:
"So obviously the representation you're getting - "complimentary ringtones" - on this page is completely false," one investigator in Tallahassee, Fla., said.
Florida investigators decided to build a case after following the ringtone money trail straight to some trusted household names and decided to build a case.
"I'll tell you the thing that really convinced me is when I learned that AT&T Mobility and the other wireless providers, that they're getting 40 to 45 percent of the profit," said Florida attorney general Bill McCollum. "They are actually making the money. It's not as though they're innocent parties in this."
He said AT&T will also refund an estimated $40 million dollars to customers who got cheated. That's just in Florida alone.
Read more at Couric & Co.: Ring, Ring … Gotcha!
It's taken four short years for the ringtone market to appear from nowhere and explode into a billion dollar market.
Just as quickly, as we reported last week, scam artists found a way to tap in, often with alluring but deceptive ads.
AT&T today told us the settlement was voluntary and that it's leading the way in the industry.
While AT&T may not admit wrongdoing, it will pay the $40 million and change its ways.
Florida today announced it's also investigating Verizon and has more than a dozen open cases against ringtone companies and advertisers - including ones run by the former King of Spam Scott Richter. They were the subjects of our Follow the Money report.
The other cell phone companies aren't off the hook either. The Florida attorney general is now targeting all the companies that use similar sales tactics - including Sprint/Nextel, Alltel and T-Mobile.
