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A billing scam just cost AT&T $7.7 million

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It’s surprisingly easy to add charges to a phone bill, and surprisingly difficult to take them off. It has gotten a little better in recent years, but it’s still a huge headache for anyone who finds an extra few dollars on their bill. This sort of thing is not an accident! This setup has been worth hundreds of millions of dollars to phone companies over the years, until federal agencies started actively suing carriers and they had to tamp it down.

But like any good scam, it’s hard to keep outsiders from horning in on the action.

Today, the FCC announced fines stemming from a small telecommunications and marijuana business in Cleveland, which had been running a remarkably lucrative business in bogus phone charges. For four and a half years, the group made recurring charges for a phony "directory assistance" service, usually around $9 a month. The business never offered any tangible services in exchange for that money and nobody seems to have voluntarily signed up. It reached thousands of businesses and added up to millions of dollars, some of which went to AT&T for providing the intermediary billing expenses.

Now, that money’s being sent back. The FCC has ordered AT&T to return $6.8 million in fraudulent charges to customer accounts, along with an extra $950,000 civil penalty for letting this go unchecked for so long. That’s not much compared the $40 billion that AT&T made last quarter, but I guess it’s better than nothing.

In a comment, an AT&T representative emphasized the company's strict requirements 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 reads. "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."

Update 4:52PM ET: Updated with AT&T statement.