SAN FRANCISCO — AOL has agreed to make it easier for customers to cancel their service as part of a $3 million settlement with 48 states and the District of Columbia that averts a court battle over how the company has been handling the exodus of Internet dial-up subscribers.
The resolution announced yesterday was driven by a deluge of complaints from AOL customers who said they tried to close their accounts, only to be thwarted in their attempts or to discover they were still being billed for services that they thought had been canceled.
The outcry triggered a multistate investigation that would have culminated in a lawsuit if Sterling, Va.-based AOL hadn”t agreed to ante up and change its ways, said David Tiede, a deputy attorney general in California.
California was among the states that played a leading role in the settlement. New York and Florida were the only states that didn”t participate in the inquiry.
AOL, the Internet division of Time Warner Inc., didn”t acknowledge any wrongdoing in the settlement.
Company spokeswoman Amy Call downplayed the impact of the settlement, saying AOL has voluntarily improved the way it handled cancellations during 2005 and 2006.
“This just codifies those safeguards,” she said.
As part of the settlement, AOL agreed to maintain an online channel for processing cancellations. Although it has long been one of the Internet”s best-known companies, AOL didn”t set up an online cancellation system until last August. Previously, all cancellation requests had to be made by fax, mail or telephone.
Subscribers who phoned AOL to cancel their service sometimes were greeted by aggressive customer-service representatives who were paid bonuses of up to $3,000 if they found a way to retain the business, according to the multistate settlement. Customers complained that AOL”s incentive system created an obstructive culture that made service cancellations difficult.
“Consumers who called were put on hold or transferred repeatedly until they hung up in disgust,” said Connecticut Attorney General Richard Blumenthal, who described AOL”s practices as “outlandish and underhanded.”
The settlement requires AOL to issue refunds to consumers who can show that they were still charged monthly fees after trying to cancel their services. AOL”s fees range from $9.95 to $25.90 per month. Mr. Tiede said the multistate investigation didn”t estimate how much money AOL will have to refund.
The $3 million settlement will be divided among the 48 states and the District of Columbia to cover the costs of their inquiry into AOL”s practices and finance other consumer protection efforts.
AOL ended March with 12 million U.S. subscribers, down from 21 million less than two years ago.
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