AOL settles states’ inquiry

Averting a looming court battle over how it has handled the exodus from its Internet dial-up service, AOL has agreed to make it easier for its remaining customers to leave as part of a $3-million settlement with 48 states and the District of Columbia.

The resolution announced Wednesday 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 discover that they were still being billed for services they thought had been canceled.

The outcry triggered a multistate investigation that would have culminated in a lawsuit if 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.

Dulles, Va.-based AOL, the Internet division of Time Warner Inc., didn’t acknowledge any wrongdoing in the settlement.

Company spokeswoman Amy Call downplayed the effect of the settlement, saying AOL had already 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 as much as $3,000 if they found a way to retain the business, according to the settlement.

Customers complained that AOL’s incentive system created an obstructive culture that made service cancellations difficult.

The settlement requires AOL to issue refunds to consumers who can show they were still charged monthly fees after trying to cancel their services. AOL’s fees currently range from $9.95 to $25.90 a month. Tiede said the multistate investigation didn’t estimate how much money AOL might have to refund.