The Federal Trade Commission has stopped internet phone service provider Vonage from imposing junk fees and creating obstacles to those who try to cancel their service. The FTC alleges that the company used dark patterns to make it difficult for consumers to cancel and often continued to illegally charge them even after they spoke to an agent directly and requested cancellation. Under the proposed court order, Vonage will be required to pay $100 million in refunds to consumers harmed by the company’s actions, make its cancellation process simple and transparent, and stop charging consumers without their consent.
“Today the FTC delivers on our commitment to protect consumers from illegal dark pattern tactics by companies that prevent consumers from cancelling their services,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “This record-breaking settlement should remind companies that they must make cancellation easy or face serious legal consequences.”
New Jersey-based Vonage, a subsidiary of Ericsson, provides internet-based telephone services (commonly known as Voice over Internet Protocol, or VoIP) to consumers and small business. According to the FTC’s complaint, the company bills their customers for these services on an automatic basis every month, either by charging a credit or debit card or withdrawing money from a customer’s bank account directly. Consumer accounts ranged from $5 to around $50 each month, while business accounts could cost up to thousands of dollars each month. In many cases, the company signs customers up using “negative option” plans that begin with a free trial, but require the customer to take action to avoid being charged.
The FTC’s complaint alleges that while Vonage has provided numerous ways to easily sign up for their plans, it has made the cancellation process markedly more difficult, leaving consumers and businesses on the hook for services they no longer want. Vonage’s practices, the complaint alleges, harmed consumers in numerous ways, specifically by:
- Eliminating cancellation options: Despite allowing its customers to sign up for services online, over the phone, and through other venues, the complaint alleges that starting in 2017, Vonage made the decision to force customers to cancel only by speaking to a live “retention agent” on the phone. The complaint notes that this practice runs counter to Vonage’s own advice to its clients not to “frustrate customers by requiring them to contact you for support that should be available on a self-service basis” and that “[i]t should be just as easy to return your product as it is to buy it.”
- Making cancellation process difficult: In addition to forcing customers into one cancellation method, it made that method difficult. The company created significant cancellation hurdles, including by making it difficult to find the phone number on the company website, not consistently transferring customers to that number from the normal customer service number, offering reduced hours the line was available and failing to provide promised callbacks. The complaint cites one internal Vonage email saying customers were “sent in a circle when they want to downgrade or remove the service.”
- Surprising customers with expensive junk fees when they tried to cancel: In many cases, customers who are able to access the cancellation line are told they will have to pay an unexpected early termination fee that was not clearly disclosed when they signed up for Vonage service. In some cases, these fees were in the hundreds of dollars.
- Continuing to charge customers even after they canceled: Customers who managed to speak to an agent and request cancellation often found that their accounts continued to be charged. Even when they contacted Vonage to complain, they received only partial refunds of the money they were charged without authorization.
As a result of the FTC’s action, Vonage has agreed to a proposed court order that would require it to:
- Stop unauthorized charges: Vonage will be required to have consumers’ express, informed consent to charge them.
- Simplify cancellation: Vonage will be required to put in place a simple cancellation process that is easy to find, easy to use, and will be available through the same method the consumer used to enroll (e.g., website, email address, or other application).
- Stop using dark patterns: The order prohibits Vonage from using dark patterns to frustrate consumers’ cancellation efforts.
- Be upfront with consumers about subscription plans: The order requires Vonage to be upfront with customers about the terms of any negative option subscription plans, including any action that must be taken to avoid being charged and timeline in which that action is required.
- Pay $100 million to be used for refunds: Vonage would be required to turn over $100 million to the FTC to be used to provide refunds to consumers.
The Commission vote authorizing the staff to file the complaint and proposed stipulated final order was 4-0. The FTC filed the complaint and proposed order in the U.S. District Court for the District of New Jersey.
NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. Stipulated final orders have the force of law when approved and signed by the District Court judge.