The settlement announced Friday between Florida Attorney General Bill McCollum and AT&T Mobility could result in refunds of more than $10 million in all, depending on how many consumers seek compensation.
McCollum said the main culprits are third-party companies that advertise ringtones and other services on the Internet, often promising that the service will be free. When customers - often teenagers - sign up, they or their parents are then surprised to find charges on their wireless bill.
"They will download this thinking it's free because the advertising on the Internet says it's free," McCollum said. And when the charge shows up on the bill, it's not always clear what it is, either, he added.
"This advertising is wrong, it's deceptive ... and it's all over the Internet," he said.
Last week, CBS News correspondent Sharyl Attkisson reported that replying to a text message or even browsing a Web site can unleash a flury of phone-bill charges for unordered and unwanted services.
It's called "cramming" - charges for services you didn't order and don't want that can be next to impossible to stop. Last year, the FCC ordered millions of dollars returned to angry cell phone customers who said they were scammed, Attkisson reported.
AT&T Mobility has agreed in the settlement to police such agreements with third-party providers and make it clear what the charges are for.
"It's going to say 'ringtones,' and it's going to give them an opportunity to cancel," McCollum said.
Atlanta-based AT&T Mobility also noted in a statement that the problem is an industrywide one, and also emphasized that it didn't sell the ringtones or other phone content, but simply billed its customers for third-party services that they had purchased.
AT&T said it has put safeguards in place to help customers understand what they'll be billed for.
Under its practices, "the customer must take an affirmative action - sending a text message - before a third-party provider can sell the customer ringtones, graphics, games, or other content," AT&T said. "Third-party providers must also make clear the pricing for these services and how to unsubscribe.
"Said another way, our goal is no surprises," the company said.
While praising AT&T for agreeing to provide refunds and better police its third-party agreements, and noting that the fraudulent advertising was done by other companies, McCollum said the wireless giant wasn't entirely blameless.
"They did have misleading billing," McCollum said. He also noted that AT&T got about 40 percent of the charges for third-party services billed to their customers.
AT&T Mobility, formerly Cingular Wireless, will also pay the state $2.5 million and contribute $500,000 toward consumer education on safe Internet use under the agreement.
McCollum said it was easier for the state to go after AT&T and pressure it to better police its contracts with third parties than to go after the actual companies selling the ringtones and other content - because there are so many of them.
"As soon as you close one of them down, another one of them is going to pop up," McCollum said.
McCollum's office had received a few hundred complaints about the billing practice, but in investigating the issue found that AT&T had received thousands of similar complaints.
Brad Ashwell, a spokesman for the consumer organization Florida Public Interest Research Group, praised McCollum for taking on the telecom giant and said the complicated nature of sales of services over the Internet and how they are billed needs to be carefully policed.
"The digital marketplace is sort of a Wild West right now," Ashwell said.
If you think you've been a victim of a cell phone scam:
According to the FCC, Consumers may submit a general complaint to the FCC at: firstname.lastname@example.org. If someone has questions or needs assistance filing a complaint, Consumer and Mediation Specialists are available Monday through Friday, 8 a.m. to 5:30 p.m. ET. Call Toll Free: 1-888-CALL-FCC (1-888-225-5322) voice, 1-888-TELL- FCC (1-888-835-5322) TTY.
Or check out the FCC's cell phone scam information page here.