Consumers burned by big fees and terms buried in itsy-bitsy fine print
SEATTLE: DIRECTV – which generated more complaints to the Washington Attorney General’s Office in recent years than any other business – will pay more than $1 million to resolve a landmark lawsuit brought by the state on behalf of consumers.
Washington became the first state to sue DIRECTV, the nation’s largest satellite television company, over allegations of unfair business practices a year ago today.
About 2,000 Washington residents have complained to the Attorney General’s Office about DIRECTV, which was accused of “unconscionable” sales practices in the lawsuit. Now those consumers can find some relief under a settlement to be filed Thursday in King County Superior Court. Meanwhile, a group of other attorneys general reached a separate settlement with DIRECTV that extends similar protections for residents of those states.
“Under our settlement, DIRECTV agrees to disclosures that will help consumers know exactly what they’re signing up for so that there are no painful surprises,” said Attorney General Rob McKenna. He praised the Consumer Protection Division and Senior Counsel Paula Selis, the assistant attorney general who lead the litigation and settlement negotiations, for their work.
The California-based company agreed to resolve customer complaints, including providing refunds if needed, and to include new disclosures in its advertisements and when customers sign up for service. DIRECTV will pay $1 million to reimburse the Attorney General’s Office for investigative costs and attorneys’ fees. The settlement does not require proof or admission of wrongdoing.
“The resolution of this case is a victory for consumers,” Selis said. “They will no longer have to search through miniscule disclosures to understand the terms of DIRECTV’s offers, and will know that low introductory prices come with significant costs and a two-year commitment.”
Selis said a key issue was DIRECTV’s requirement that new customers to commit to a two-year equipment lease and programming contract. The state’s suit alleged the contracts included numerous, sometimes undisclosed fees. The state also alleged that the company automatically renewed annual sports programming without adequate disclosures, failed to tell consumers they would be billed at the conclusion of “free trials” of special movie channels, and unfairly extended the terms of consumers’ contracts when DIRECTV repaired broken equipment.
Consumers often weren’t aware of the terms or that DIRECTV would charge them up to $480 if they canceled before the end of the first two years. Even some customers who weren’t able to use the service because of reception problems or faulty equipment were charged penalties, Selis said.
Rebates were another problem. In order to obtain a promotional rate, customers had to affirmatively request a rebate. Customers who submitted the rebate form after installation could be charged full price for their service for up to two months. Those who failed to request the rebate within 60 days of an order were charged the full price indefinitely – even if DIRECTV failed to adequately inform them of the need to submit the form, the state’s suit alleged.
The settlement addresses a number of issues of concern to consumers and the Attorney General’s Office, including:
- CANCELLATION FEES: DIRECTV will not impose a cancellation fee on a consumer who ends service because of a recurring problem that can’t be fixed.
- ADVERTISING AND SALES DISCLOSURES: The company must clearly disclose all material terms in its advertisements and prior to any sale. The disclosures must include the cost of the service, the contract length, additional charges for HD or DVR equipment, cancellation penalties, whether a promotional price is conditional on a rebate, whether an offer requires a particular payment, and other pertinent details. Extremely important disclosures, such as the requirement for a rebate, the required term of the consumer’s commitment and the period the promotional price will be charged, must be disclosed in direct proximity to the price itself.
- CONTRACT CHANGES: DIRECTV can’t require consumers to enter into a new or extended contract when simply replacing or repairing defective equipment. If a service upgrade or other change by a consumer requires a new or additional term of commitment, DIRECTV must first obtain the consumer’s consent to enter into a new or extended contract. The company must give consumers at least 30 days notice prior to automatically renewing any seasonally provided sports package.
- PROGRAMMING LIMITATIONS: The company must disclose all limitations on the availability of sports programming and local channels.
- REBATES and PROMO OFFERS: Under the settlement, DIRECTV must disclose whether a rebate is required to obtain the promotional price. If the consumer’s first bill does not reflect the price agreed to at the time of sale, DIRECTV must either provide that price or cancel the contract without penalty, if requested. If the price discrepancy is due to the consumer’s failure to obtain the rebate price, DIRECTV must facilitate the rebate. Additionally, the company can’t represent that a consumer will receive “cash back” as part of a promotion, when the consumer actually will receive a bill credit.
- FINANCING: DIRECTV allegedly failed to disclose that the company’s least expensive package of $29.99 per month is only available to customers who meet certain financing conditions and agree to have the costs automatically charged or debited to them. The settlement requires ads to disclose if an offer is contingent on a consumer’s creditworthiness.
- RETENTION OF FUNDS: Prior to selling programming, DIRECTV asks for a customer’s Social Security number in order to perform a credit check. Customers who refuse to provide the number or whose credit is deemed insufficient are required to pay $200-$300 to obtain service. Under the settlement, DIRECTV must disclose whether the payment is fully or partially refundable, the conditions the consumer must meet to obtain a refund, and the period of time in which DIRECTV must refund the payment if all conditions for the refund are met.
To ensure compliance with the settlement, DIRECTV will train its third-party retailers to comply with the terms of the agreement and monitor their sales activities. The company will also maintain all consumer complaints for three years. Failure to comply with the settlement would trigger civil penalties of up to $25,000 according to Washington’s law.
Under the settlement, DIRECTV agrees to resolve complaints from Washington residents. Consumers are eligible for restitution or other appropriate relief if their complaint concerns conduct addressed by the settlement that occurred since Jan. 1, 2007, and the matter remains unresolved. There is also a window for new complaints that have not yet been submitted to the Attorney General or resolved by DIRECTV. If DIRECTV is unable to successfully resolve the complaint, the company will inform consumers of their right to have the issue referred to a claims administrator who will issue a decision resolving the complaint.
Consumers who believe they are eligible for relief under the settlement and have not already filed a complaint about DIRECTV with the Attorney General’s Office may do so online at www.atg.wa.gov by May 31, 2011. Consumers may also call the Attorney General’s Consumer Resource Center at 1-800-551-4636 to request a complaint form be mailed to them. Calls are answered from 10 a.m. to 3 p.m. weekdays.
Consumers who have already filed complaints with the Attorney General's Office about DIRECTV don't need to refile.
DOCUMENTS:DIRECTV Consent Decree
Media Contact: Kristin Alexander, Media Relations Manager – Seattle, (206) 464-6432, firstname.lastname@example.org