AT&T pays out $7.75M for allowing directory assistance scam

AT&T has settled with the FCC over a “cramming” investigation that found the carrier allowed scammers to place unauthorized charges onto customer bills, and collected a fee from the sham companies involved in the scheme.

Under the agreement, AT&T will refund all current and former customers affected by the scam -- mostly small businesses -- in full, an action that will cost the provider as much as $6.8 million. AT&T will also pay a fine of $950,000 to the U.S. Treasury.

The cramming scheme was discovered by the DEA (U.S. Drug Enforcement Agency) during an investigation into drug-related crimes and money laundering by two Cleveland-area sham companies, Discount Directory, Inc. (DDI) and Enhanced Telecommunications Services (ETS). While seizing drugs, cars, jewelry, computers and other items, the DEA discovered financial documents detailing the plan to defraud telephone customers.

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Both DDI and ETS purported to provide third-party directory assistance services to AT&T customers. However, despite submitting charges for “thousands of AT&T customers” no such services were rendered. The sham companies billed customers about $9 per month, from which AT&T collected a fee for each charge.

“A phone bill should not be a tool for drug traffickers, money launderers, and other unscrupulous third parties to fleece American consumers,” said Enforcement Bureau Chief Travis LeBlanc in a release issued by the FCC.  “Today’s settlement ensures that AT&T customers who were charged for this sham service will get their money back and that all AT&T consumers will enjoy greater protections against unauthorized charges on their phone bills in the future.”

In addition to issuing refunds and paying a fine, the FCC’s Enforcement Bureau is requiring AT&T to stop billing for “nearly all” third-party services and products on its wireline bills. It also must adopt processes to get express informed consent from customers and revise their billing so that third-party charges are clearly identified on monthly bills. AT&T also must offer a free service for customers to block third-party charges, and needs to put a “detailed program” in place to address and issue refunds to customers who complain about unauthorized third-party charges.

This isn’t the first fine that AT&T has faced recently: the carrier was fined $106,000 in late July for overcharging two Florida schools under the federal E-Rate program.

For more:
- see this FCC release and consent decree (PDF)

Related articles:
AT&T fined $106K for overcharging schools in Florida under E-rate program

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