AT&T to pay $7.75 million for letting scammers bill consumers
AT&T has agreed to pay a $7.75 million settlement after an investigation revealed two Cleveland companies were charging customers for directory assistance calls they never made, according to the Federal Communications Commission's Enforcement Bureau.
Under the settlement, AT&T will issue full refunds to all residential and business wireline customers billed by AT&T Illinois, AT&T Texas and AT&T Ohio for the so-called directory assistance service since Jan. 1, 2012. The refunds will total $6.8 million and AT&T will pay a $950,000 fine to the U.S. Treasury.
Checks will be mailed automatically to affected customers in the next 90 days. A total number of affected customers in Illinois and elsewhere was not immediately available, said AT&T Illinois spokesman Phil Hayes.
"We have implemented strict requirements on third parties submitting charges for AT&T bills to ensure that all charges are authorized by our customers, indeed, those requirements go beyond the requirements of FCC rules and impose safeguards that the FCC proposed but never adopted," said Hayes. "Nonetheless, unbeknown to us, two companies that engaged in a sophisticated fraud scheme were apparently able to circumvent those protections and submit unauthorized third-party charges that were billed by AT&T."
The so-called cramming, or unauthorized third-party charges, appeared on customers' wireline telephone bills. AT&T allowed scammers to charge customers about $9 per month for a sham directory assistance service.
The scam was uncovered by the U.S. Drug Enforcement Administration while investigating two Cleveland-area companies, Discount Directory Inc. and Enhanced Telecommunications Services, for drug-related crimes and money laundering. In the course of seizing drugs, cars, jewelry, gold and computers totaling about $3.4 million from the companies' principals and associates, DEA investigators discovered financial documents related to a scheme to defraud telephone customers, the FCC said in a statement.
"A phone bill should not be a tool for drug traffickers, money launderers, and other unscrupulous third parties to fleece American consumers," FCC Enforcement Bureau Chief Travis LeBlanc said in a statement. "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."