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AOL, Compuserve Settle FTC Charges

The Federal Trade Commission (FTC) on Tuesday announced a settlement of two unfair trade practice charges against America Online and its Compuserve subsidiary over complaints the ISPs made it overly difficult for subscribers to cancel monthly subscriptions.

Making it clear AOL was not admitting any wrongdoing, the FTC said the ISP faces civil penalties of $11,000 per violation for any future violations.

In a separate statement, AOL noted that, after reviewing the facts, the FTC decided not to impose any fines or monetary restitution. "For years, AOL has taken proactive and voluntary steps to upgrade and enhance our member services practices to make them more efficient, effective and consumer-friendly. The Company has always made, and continues to make, exceptional customer service and customer satisfaction a top priority in all business practices," AOL added.

As a further improvement, the ISP says it will mail a letter to members who inquire about canceling their AOL service but choose to remain as subscribers to the service. "This new letter serves the same purpose as the confirmation emails AOL has already been sending to such members, which reaffirms the member's intention to continue subscribing to the AOL service," the company added.

According to a proposed consent decree released Tuesday, AOL will settle the four-year-old charges that they continued to bill subscribers even after they asked to cancel their subscriptions. Another allegation involving the late delivery of $400 rebates to consumers who signed up for Compuserve service was also settled.

The FTC complaint accused the ISP of trying to persuade consumers to change their minds about canceling their AOL service. "The FTC charged that AOL failed to implement appropriate measures to ensure that all customer requests for cancellation were properly executed. As a result, in numerous instances, subscribers who requested cancellation continued to be charged monthly service fees. The complaint alleges that this unfairly harmed consumers," the FTC said in a statement.

"No company should retain subscribers against their wishes," said Lydia Parnes, Deputy Director of the FTC's Bureau of Consumer Protection. "When consumers cancel their service, they expect the billing to stop."

In a 5-0 vote, FTC commissioners agreed to accept public comments on the proposed decree until October 23 before a final order is issued.

In a separate complaint, the FTC alleged that AOL and CompuServe failed to deliver timely $400 rebates to consumers. The companies promised consumers a $400 cash rebate toward the purchase of an eligible computer, if the consumers signed up for three years of $21.95 per month CompuServe ISP service.

The Commission alleged the companies promised that the rebates would be delivered within eight to 10 weeks, and in some cases, 45 days. However, AOL and Compuserve "unfairly extended the time period in which they delivered the rebates to consumers, causing substantial injury to consumers whose rebates were not delivered within the time promised," according to the complaint.

The terms of the proposed settlement would address cancellation practices to require the ISPs to establish and maintain appropriate measures for ensuring that subscribers' requests for cancellation are promptly processed and that billing ceases.

The FTC said it would also prohibit respondents from charging any subscriber who asks to be cancelled and is recorded as having agreed to continue his or her service unless they first obtain the subscriber's express informed consent to the continued billing.