Federal Communications Commission (FCC) said on Monday that telecom network operator AT&T will pay $7.75 million after a federal investigation found it allowed unauthorized third-party charges on its customers’ telephone bills.
FCC said the company allowed scammers to charge customers approximately $9 per month for a sham directory assistance service. The fraud was uncovered by the U.S. Drug Enforcement Administration while investigating two Ohio companies for drug-related crimes and money laundering. The settlement includes $6.8 million in refunds and a $950,000 federal fine.
“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.
The DEA discovered the cramming scam while investigating two Cleveland-area companies, Discount Directory (DDI) and Enhanced Telecommunications Services (ETS) for drug-related crimes and money laundering.
In the course of seizing drugs, cars, jewelry, gold, and computers (totaling close to $3.4 million) from the companies’ principals and associates, DEA investigators discovered financial documents related to a scheme to defraud telephone customers.
The key participants in the scheme told DEA agents that the companies were set up to bill thousands of consumers (mostly small businesses) for a monthly directory assistance service on their local AT&T landline telephone bills. The DEA referred this investigation to the FCC’s Enforcement Bureau in 2015.
AT&T received a fee from the companies for each charge AT&T placed on its customers’ bills. Though DDI and ETS submitted charges for thousands of AT&T customers, they never provided any directory assistance service. Neither DDI, ETS, nor AT&T could show that any of AT&T’s customers agreed to be billed for the sham directory assistance service.
AT&T will issue full refunds to all current and former consumers charged for the sham directory assistance service since January 2012.
The settlement include requirements that AT&T cease billing for nearly all third-party products and services on its wireline bills, adopt processes to obtain express informed consent from customers prior to allowing third-party charges on their phone bills, revise their billing practices to ensure that third-party charges are clearly identified on bills.