The Federal Communications Commission (FCC) has ordered AT&T to pay $7.75 million in fines and refunds, for allowing drug traffickers to sneak bogus charges to its customers’ bills. Most of the victims of the fraud were small businesses.
The fraud was first discovered by the US Drug Enforcement Authority (DEA). The scam was exposed when the DEA stumbled upon it during a probe into two Ohio companies for drug-related crimes. Financial documents uncovered whilst law enforcement agencies seized the companies’ assets, disclosed the fraud-scheme targeting telephone customers.
On Monday, the FCC revealed that AT&T was charging the scamming firms for each bogus charge placed on its customers’ bills. The companies responsible for the scam charged AT&T customers $9 per month for a fake directory assistance service. Customers did not receive any assistance in return of the monthly fee.
“A phone bill should not be a tool for drug traffickers, money launderers, and other unscrupulous third parties to fleece American consumers,” said chief of the FCC enforcement bureau, 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.”
The US wireless carrier will refund money for the bogus directory service (active since January 2012), to both to its current and former customers according to the FCC. AT&T is to pay $950,000 as a federal fine to the US Treasury, whereas approximately $6.8 million will be paid out in refunds. This is not the first time that AT&T has been fined for unfair billing. In 2014, the company agreed to pay a record-setting $105 million in settlement for billing users for unsubscribed third-party services.
In a comment on the matter, an AT&T representative emphasized on the strict requirements set by the company for third-party billing: "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." The statement further says: "Nonetheless, unbeknownst 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."
Billing was stopped for the two companies in June last year, according to AT&T. The company plans to send refund checks to customers in the next 90 days.
Since this is not the first instance that AT&T has been involved in unfair billing, the news is likely to trigger a sense of distrust in its customer base. Though a significant fall in its subscribers as a result of this news is unlikely, however, it won’t come as a surprise if some customers decide to switch networks.