AT&T has agreed to pay $7.75million to resolve 'cramming' charges
August 8, 2016
When federal drug agents seized nearly $3.4 million worth of drugs, cars, jewelry, gold and computers during an investigation into two Cleveland-area businesses, they uncovered evidence for an unlikely enforcement partner: the Federal Communications Commission.
The U.S. Drug Enforcement Administration found financial documents that showed the companies Discount Directory Inc. and Enhanced Telecommunications Services were defrauding thousands of telephone customers—mostly small businesses—by charging $9 per month for a sham directory assistance service. Meanwhile, AT&T was receiving a fee from the companies for each charge placed on its customers’ bills.
On Monday, more than a year after the DEA referred the investigation to the FCC, AT&T agreed to pay $7.75 million to resolve claims that the company included unauthorized third-party charges on its customers’ bills, a practice known as “cramming.”
“A phone bill should not be a tool for drug traffickers, money launderers, and other unscrupulous third parties to fleece American consumers,” said Travis LeBlanc, chief of the FCC enforcement bureau. “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.”
For the FCC, it was the second cramming settlement in two years against AT&T, which had agreed in 2014 to pay $105 million in fines and refunds to resolve an investigation into unauthorized charges for third-party subscriptions and premium text messaging services.
According to the FCC's settlement documents, the two Cleveland-area companies submitted telephone numbers to AT&T with instructions for those customers to be charged for an unlimited directory assistance service.
AT&T rejected thousands of numbers in some months, finding that the accounts were unbillable, sometimes because the number charged was for a coin-operated pay phone. In other instances, according to the FCC, AT&T could not find accounts for the numbers provided or the charge was submitted prior to the effective date of service.
In the consent order, the FCC said AT&T “ignored a number of red flags that the charges were unauthorized, including thousands of charges submitted by the companies for nonexistent, disconnected, or otherwise ‘unbillable’ accounts.”
AT&T also never required Discount Directory and Enhanced Telecommunications Services to prove that the customers had authorized the monthly charges, according to the FCC.
An AT&T spokesman said Monday that the company placed strict requirements on third parties to ensure that charges were authorized by customers. The requirements went beyond the FCC’s rules, AT&T said, providing safeguards that the agency has “proposed but never adopted.”
“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,” the company spokesman said.
As part of the settlement, AT&T agreed to pay refunds—expected to total $6.8 million—to current and former customers who were charged for the nonexistent directory assistance service after January 2012. AT&T will also pay a $950,000 fine.
http://www.nationallawjournal.com/id=1202764583575/How-a-DEA-Drug-Bust-Handed-the-FCC-a-Case-Against-ATampT?slreturn=20160710103642
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