Yesterday, the Federal Trade Commission announced that AOL, Compuserve & Prodigy had all agreed to settle charges that their "free" trial offers practices often resulted in unexpected charges to consumers. The FTC alleged that the offers did not make sufficiently clear that a consumer had to cancel the membership and that those who did not would be automatically billed for monthly charges, even if they never used the service again, in violation of the FTC Act.
The FTC also alleged that AOL failed to tell its customers that 15 seconds of connect time was added to each online session, resulting in additional undisclosed costs. According to the FTC this additional 15 seconds, when combined with AOL's practice of always rounding up to the nearest minute, led to customers incurring unnecessary additional charges. For example, an online session of 2 minutes and 46 seconds, with the 15 second addition, totals 3 minutes and 1 second, which is then rounded up and billed by AOL as 4 minutes. That's 1 minute and 14 seconds of time the customer didn't actually spend online but for which AOL was charging.
Finally the FTC charged that all three providers did not obtain proper authorization from customers before making electronic withdrawals from consumer bank accounts and did not give advance notice as to the amounts of the withdrawals, in violation of the Electronic Funds Transfer Act (EFTA). This left many consumers with bounced checks and overdrawn accounts.
The settlements will require the online service providers to clearly tell customers that they must cancel the service before the end of the offer to avoid charges and must provide at least one easy method of canceling. All three will be prohibited from misrepresenting any terms of the online service offer. The firms also will have to obtain consumers approval before making withdrawals from bank accounts and will have to notify their customers of the amount to be withdrawn. In addition, AOL is prohibited from misrepresenting the fees assessed for its service or the terms governing electronic transfers. AOL has also agreed to run a consumer education campaign about electronic payment systems.
For full information about the settlement and your rights under the FTC Act and the EFTA, check out the FTC press release.
Note: With these settlements, AOL, Prodigy & Compuserve settle the FTC charges but do not admit any law violations.
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