Attorney General McDaniel Announces Agreement with AOL

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July 11, 2007

Company will refund consumers and modify its cancellation and retention practices

LITTLE ROCK- Attorney General Dustin McDaniel today announced an agreement with AOL requiring the company to make significant changes in honoring consumer cancellation requests and further ordering refunds for consumers. Arkansas served as a member of the Executive Committee that negotiated the agreement with AOL.

The agreement, entered into by Arkansas, 47 other states, and the District of Columbia, resolves complaints in which consumers have alleged difficulty and confusion in attempting to cancel their AOL paid services. AOL formerly limited the methods available for consumers to cancel their accounts, such that the majority of consumers attempted to cancel by directly calling AOL. Customer service representatives received incentives for retaining or "saving" customers in lieu of cancellation, and consumers complained that as a result, cancellation was extremely difficult if not impossible. Today's agreement puts strict limitations on this practice and requires recording and verification of these telephone calls. In addition, the agreement expands consumers' options by allowing them to cancel through a simple online method via the website

The settlement requires AOL to reimburse the states $3,000,000, $165,000 of which is Arkansas's share. The money will go to Consumer Education and Enforcement efforts in the Attorney General's office. In addition, AOL will provide refunds to consumers who either contact AOL directly or file a complaint through our office.

"I am thankful AOL has changed their business practices to be more consumer friendly," McDaniel said. "I feel these changes will go a long way in making them a better company, as well as making it easier for consumers to make changes with their accounts."

The agreement further requires AOL to make broad refunds to consumers who have complained of unauthorized charges for AOL service. In addition to resolving any outstanding complaints, the company will be adopting an ongoing process of refunding consumers for unauthorized charges, and will continue to cooperate with the states in these efforts.

Today's settlement also addresses a number of other billing practices that created consumer confusion. Specifically, AOL will be revising its disclosures regarding reactivation of terminated accounts as well as its disclosures relating to accounts billed directly to a consumer's monthly telephone bill. AOL will also significantly revise its practice of allowing consumers to create "spin off" accounts - which are additional paid accounts for AOL service stemming from one original membership. These accounts can now only be created over the phone in a recorded conversation with a customer service agent, who must make detailed disclosures of the applicable costs.

AOL recently announced that it would begin limiting its role as an Internet access provider, allowing its customers to convert to free e-mail accounts. The terms of today's agreement should minimize the potential for consumer confusion during this transition.