The FCC announced Monday that it has reached a settlement with AT&T in relation to sham directory assistance charges levied on customers by third parties with fairly long rap sheets. The telecom corporation will pay back $7.75 million to customers.

Two Cleveland companies, Discount Directory, Inc. (DDI) and Enhanced Telecommunications Services (ETS) falsely charged consumers for a service about as timely and useful as telegraph operation. Apparently, AT&T forgot the internet made dialing 411 obsolete.

Here’s how the the scam was uncovered, according to the FCC:

In the course of seizing drugs, cars, jewelry, gold, and computers (totaling close to $3.4 million) from the companies’ principals and associates, DEA investigators 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.

Then, AT&T got a cut:

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. Neither DDI, ETS, nor AT&T could show that any of AT&T’s customers agreed to be billed for the sham directory assistance service.

Then the FCC takes a moment to chastise AT&T for the lack of oversight:


Phone companies like AT&T have a responsibility to ensure third-party charges are legitimate and were approved by the consumer.

DDI and ETS were bilking those small businesses out of $9 a month for years. Once the DEA found it, it reported its findings to the FCC last year.

“A phone bill should not be a tool for drug traffickers, money launderers, and other unscrupulous third parties to fleece American consumers,” says Travis LeBlanc of the FCC 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.”

This time, consumers affected by the scheme will get their money back. “AT&T will issue full refunds to all current and former consumers charged for the sham directory assistance since 2012,” and “Refunds are expected to total $6,800,000.” AT&T is also being fined an additional $950,000 by the FCC.

Though the settlement establishes stronger regulation, oversight, and consumer reporting protocols, erroneous charges levied on consumers isn’t isolated to AT&T or landline customers. The FCC statement reads: “In the last five years, the Commission has taken more than 30 enforcement actions against carriers for cramming and unauthorized carrier switches, totaling more than $360 million in proposed penalties and payments to the U.S.” Some of those cases are still pending.

Photos via Getty Images / Toby Jorrin

W. Harry Fortuna is a science and tech journalist in New York City. He comes to journalism after a long career in film and TV production on the West Coast. He is particularly interested in the organ between our ears and how our increasingly expansive understanding of it will affect our future.