SPRINGFIELD, Ill. (Legal Newsline)-Illinois Attorney General Lisa Madigan has reached a multi-million dollar settlement agreement with AT&T Illinois that provides customer refunds and freezes call rates.

The agreement announced Monday will provide telephone customers with $1.5 million in refunds and $5.5 million in future rate concessions through November 2011, the attorney general's office said.

The settlement comes after the Democratic attorney general began an investigation into the company that found AT&T Illinois had failed to make mandated rate reductions on certain rate packages as required by state regulators.

"This agreement is a definite win for AT&T Illinois customers who should have been paying lower rates on specific services," Madigan said. "AT&T has made refunds and reduced the rates as originally agreed and has further agreed to defer future increases that the Illinois Commerce Commission had authorized."

AT&T corrected its billing errors in October and November 2007 both by adjusting the rates for Consumers Choice Basic and Consumers Choice Extra going forward and by refunding the overcharges plus interest at five percent, totaling $1,591,880, the attorney general's office said.

A company spokesman said in a statement to Legal Newsline that the company "previously uncovered a technical billing error that was quickly corrected."

Spokesman Andrew Ross said AT&T worked with the attorney general's office, the Illinois Commerce Commission and the Citizens Utility Board "on ways to promote even more consumer-friendly options that will help people stay connected with their world."

As a part of the settlement, AT&T Illinois will forgo the last of three ICC-authorized per-call rate increases that was scheduled to take effect on Jan. 1. Also, AT&T will freeze the current 4 cents per local call rate for 18 months through July 1, 2010.

"AT&T Illinois over-billed consumers who believed they were obtaining rate reductions. Based on our investigation, AT&T promptly repaid consumers for the overcharges with interest and, now as part of the settlement, the company has agreed to maintain lower per call rates and a lower package rate for an extended period of time," Madigan said.

From Legal Newsline: Reach reporter Chris Rizo at chrisrizo@legalnewsline.com.