AT&T has agreed to pay nearly $7.8 million to settle government allegations that the phone giant allowed scammers to charge some customers about $9 a month for a fake directory assistance service, uncovered in a sting from, of all places, the Drug Enforcement Agency.
The settlement, announced by the Federal Communications Commission (FCC) in August, is the latest action against the “cramming” scam. Cramming is when a third party bills you for unauthorized charges. Scam artists take advantage of complex telecom bills to hide fraudulent charges–usually less than $10 a month–among the other legitimate fees you receive on a monthly basis.
AT&T will issue refunds, totaling almost $7 million, to current and former customers who were charged the fee since 2012. AT&T also agreed to pay a $950,000 fine to the government.
The company is working on a plan to distribute the refunds to customers who received the unauthorized third-party charges, according to an FCC statement.
In the last five years, the FCC has taken more than 30 enforcement actions against phone carriers for cramming and unauthorized carrier switches. In this case, the FCC says AT&T received a fee from companies that added the charges to customer bills but never provided the services they promised.
The DEA stumbled onto the scam while probing a drug-sales and money-laundering operation.
The DEA discovered the scam while investigating two Cleveland-area companies, Discount Director, Inc. (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’ associates, DEA investigators found financial documents related to a scheme to defraud telephone customers, according to an FCC release.
“A phone bill should not be a tool for drug traffickers, money launderers, and other unscrupulous third parties to fleece American consumers,” said FCC Enforcement Bureau Chief Travis LeBlanc 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.”
Under the settlement, AT&T has agreed to cease billing for nearly all third-party products and services and it is required to obtain express consent from customers before allowing third-party charges on their phone bills.
This isn’t the first time AT&T has been in hot water with the FCC. In 2014, the company agreed to pay $105 million in fines and refunds to current and former customers for unauthorized third-party subscriptions and premium text messaging services as part of a global cramming settlement with the FCC.