AT&T has agreed to pay $7.75 million after a Drug Enforcement Administration (DEA) investigation uncovered a cramming scam in which AT&T customers were billed $9 a month for a non-existent directory assistance service.

When the DEA investigated two Cleveland-area companies for drug-related crimes and money laundering, the agency seized the companies' "cars, jewelry, gold, and computers." In the process, the feds "discovered financial documents related to a scheme to defraud telephone customers," according to a Federal Communications Commission announcement today.

"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," the FCC said. "The DEA referred this investigation to the FCC’s Enforcement Bureau in 2015." The FCC investigated further and convinced AT&T to agree to today's settlement.

AT&T received a fee from the companies, known as Discount Directory, Inc. (DDI) and Enhanced Telecommunications Service (ETS), each time they placed a charge on AT&T customers' bills, the FCC said. The charges were issued to wireline phone customers only.

"Although DDI and ETS submitted charges for thousands of AT&T customers, they never provided any directory assistance service," the FCC said. "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. Phone companies like AT&T have a responsibility to ensure third-party charges are legitimate and were approved by the consumer." AT&T never required proof from the companies that they obtained customer approvals.

The cramming charges began in January 2012 and apparently continued until the DEA investigation, even though AT&T told a Senate committee in March 2012 that it would restrict third-party billing to prevent fraud.

According to the FCC, AT&T had contracts with DDI and ETS allowing them to bill customers but didn't follow up on obvious red flags. There were some months in which AT&T rejected thousands of requests to bill phone numbers because they were "unbillable." Some phone numbers weren't attached to AT&T accounts, some of the numbers were for coin-operated pay phones, and some accounts had been disconnected. Despite this, "AT&T did not consider unbillable numbers to be an indicator for identifying cramming," the FCC said in an order released today.

AT&T will issue full refunds to all current and former customers who were improperly charged since January 2012, the FCC said. The refunds are expected to total $6.8 million, and AT&T will also pay a $950,000 fine to the US Treasury. Besides that, AT&T is required to implement a new program for refunding customers victimized by unauthorized third-party charges, and the company must stop charging wireline phone customers for certain types of third-party products and services.

This isn't AT&T's first time paying back victims of cramming. After a previous investigation in 2014, AT&T agreed to pay $105 million in refunds and fines to settle a mobile bill cramming case.

UPDATE: AT&T has provided a statement, saying that it stopped billing on behalf of DDI and ETS in June 2015, and that it will issue refunds via check within 90 days.

"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 and impose safeguards that the FCC proposed but never adopted," AT&T said. "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."