AT&T Will Pay Refunds After Letting Scammers Bill Consumers

The company will pay $7.75 million, with $6.8 million going directly to conned customers

AT&T Will Pay Refunds After Letting Scammers Bill Consumers
Image: AT&T
August 8, 2016

AT&T has reached a settlement with the Federal Communications Commission (FCC) over charges of "bill cramming." The telecommunications giant allowed scammers to charge customers approximately $9 per month for a sham directory assistance service.

The con was uncovered as part of a Drug Enforcement Administration (DEA) investigation into two Cleveland-area companies, Discount Directory, Inc. (DDI) and Enhanced Telecommunications Services (ETS) for drug-related crimes and money laundering. DEA agents 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. AT&T received a fee from the companies for each charge AT&T placed on its customers' bills. Although DDI and ETS submitted charges for thousands of AT&T customers, they never provided any directory assistance service.

"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. "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."

AT&T, under the terms of the settlement, will issue refunds to all current and former consumers charged for the sham directory assistance service since January 2012. These refunds are expected to total $6.8 million. A payment of $950,000 will go to the U.S. Treasury.

In addition to the fines, the settlement requires AT&T to provide stronger protections for consumers in the future. These include requirements that the company will:

  • 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 and conspicuously identified on bills so that customers can see what services they are paying for; and
  • offer a free service for customers to block third-party charges.

In 2014, AT&T agreed to pay $105 million in fines and refunds to current and former wireless customers for unauthorized third-party subscriptions and premium text messaging services as part of a global cramming settlement with the FCC, Federal Trade Commission (FTC), and states' attorneys general.