AT&T to pay $105 million to settle charges it 'crammed' phone bills

WASHINGTON (Reuters) - Telecommunications giant AT&T Inc has agreed to pay $105 million to settle allegations that it put unauthorized charges on customers' cell phone bills, a practice known as cramming, a source told Reuters on Wednesday.

The settlement comes after years of complaints from consumers about being charged for services, for example daily horoscopes, that they never requested.

AT&T will pay $80 million to refund customers while $20 million is earmarked for penalties and fees to all 50 U.S. states and Washington, the source said. Another $5 million in penalties will go to the Federal Communications Commission, according to the source, who was not authorized to speak on the record.

Politico was the first to report the settlement.

Under pressure from state attorneys general, AT&T, T-Mobile US , Verizon and Sprint agreed in November to stop billing customers for such third-party services.

In July, the FTC filed a complaint against T-Mobile USA, accusing the wireless provider of cramming millions of dollars of unauthorized charges onto customers' bills.

The charges for ringtones, subscriptions for love tips, horoscopes and the like sent to subscribers by text message usually cost about $9.99 per month. They are often buried in multi-page cell phone bills and described generically, for example as "usage charges."

(Reporting by Diane Bartz and Alina Selyukh; Editing by Ros Krasny and Susan Heavey)