AT&T Accused of 'Bait-and-Switch Scheme' for Phone Upgrades

An AT&T handset upgrade exchange program was a “bait-and-switch scheme,” alleged a class action (docket 1:22-cv-5155) filed in U.S. District Court for Northern Georgia in Atlanta Friday against the carrier and American Express.

Plaintiff Robert Graham, a Springboro, Ohio, resident, alleged AT&T “falsely and deceptively” sends customers upgrades in the form of new phones on new lines, “not disclosing and not including a suitable return method of such unordered phones,” said the complaint, saying the company, through American Express, assesses service charges for customers who don’t return phones in a time period AT&T sets.

AT&T provides a return merchandise authorization label with the phones it ships in the upgrade program, which “due to its agents essentially guarantees a late arrival,” said the complaint. The carrier “uses this as a lever to covertly, improperly, and unilaterally charge for phones and services" and holds "customer’s number hostage until such fees are paid,” it said. The delivery manner “is designed by AT&T to further ensure that the return and receipt dates … go unnoticed by customers.”

Customers are charged a one-time activation fee for lines they didn’t order, the complaint said. The fee is refundable for three days, “well before they receive the first monthly bill,” about two weeks after the sign-up period, Graham alleged. Plaintiffs are signed up for one- or two-year service commitments and are charged an early termination fee if they cancel their service more than 14 days after purchase, the complaint said.

AT&T’s activation, phone, restocking and early termination fees, plus a “balloon payment” for early termination of a contract, “all function as ways to penalize and deter customers” from canceling service after receiving a phone or signing up for service, said the complaint. A $1.99 administrative fee charged per phone by AT&T and Amex is unlikely to be noticed by customers who “reasonably expect small changes in the total amount billed each month and will not be able to tell” that AT&T and Amex increased fees, the complaint alleged.

Plaintiffs seek an order enjoining AT&T and Amex from committing “unlawful, unfair and fraudulent business practices,” plus compensatory, punitive and exemplary damages in an amount to be determined at trial.

“We dispute the allegations in this lawsuit and believe they should be resolved through our arbitration process, which has been recognized as one of the most-consumer friendly in the country,” emailed an AT&T spokesperson Tuesday.