AT&T and the FCC are butting heads, but for once, it is not over net neutrality. AT&T has been fined $7.75 million USD for indirectly participating in a directory assistance billing scam. Affected customers are expected to receive $6.8 million of these funds while the remaining $950,000 is a fine that will go to the United States Treasury.
AT&T essentially allowed third-party scammers to charge customers $9 per month for a non-existent “directory assistance service”. FCC Chief Travis LeBlanc remarked, “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.”
Image from Chris Potter on flickr.com
The scam was actually discovered by the U.S. Drug Enforcement Administration (DEA) while investigating drug-related and money laundering crimes. The DEA seized $3.4 million-worth of drugs, cars, jewelry, gold, and computers from Cleveland-based companies Discount Directory, Inc. (DDI) and Enhanced Telecommunications Services (ETS). The DEA also discovered documents that were intended to defraud telephone customers. The main targets were small businesses with landlines.
AT&T received a fee from the companies each time a customer was charged. The directory assistance service never existed and none of the companies could prove that the customers had even agreed to receive the “service”. The DEA referred this investigation to the FCC’s Enforcement Bureau in 2015 and the verdict was released this week.
The FCC has ordered AT&T to refund all affected customers, both current and former, since 2012. It must also clearly identify any third-party charges on customer’s bills, and offer a free service for customers to block third-party. According to the FCC, it has “taken more than 30 enforcement actions against carriers for cramming and unauthorized carrier switches”. In 2014 AT&T paid $105 million in fines for unauthorized third-party subscriptions and premium text messaging services.