NEW YORK (CNN/Money) - AT&T Corp. will pay $400,000 in fines and issue refunds to about 300,000 New Yorkers to settle claims that it billed people who had not signed up for one of its long-distance plans, the New York Attorney General said Tuesday.

The settlement agreement caps a six-month investigation by New York Attorney General Eliot Spitzer's office into billing practices at the nation's biggest long-distance phone company, sparked by hundreds of complaints from customers who were billed $7.72 for a long-distance service they neither requested nor used, Spitzer said in a statement on his Web site.

AT&T will also reform its billing procedures and provide consumers with additional information on telephone services, the statement said.

AT&T said the problem was simply a matter of billing errors but declined to say how much would be refunded.

"AT&T will continue the comprehensive, proactive effort that began earlier this year, to rectify the billing error by identifying all affected consumers to process refunds and credits of all charges associated with the error," company spokesman Robert Nersesian said in a statement.

The settlement comes amid ongoing turmoil at AT&T, which said last week it will stop adding new residential customers in seven states after a court threw out regulations giving it discounted access to the dominant local telephone networks.

The company also cut earnings and sales forecasts for 2004, and the Wall Street Journal reported it will cut spending on marketing services like call centers, noting Accenture Ltd. is one of the vendors affected. Representatives from Accenture did not return phone calls.

Nersesian declined to comment on the reported cutbacks.

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As part of the settlement, AT&T must also stop trying to collect past-due bills relating to the charge and send notices to customers explaining its billing plans and how customers can switch carriers, Spitzer's statement said.

Consumers have 45 days to register a complaint and request reimbursement from the company.

AT&T (T: up $0.16 to $14.58, Research, Estimates) stock rose about 1 percent in afternoon New York Stock Exchange trading.