DirecTV agrees to change business practices
As part of a settlement with the states, some customers with unresolved complaints may be entitled to refunds.
Washington Attorney General Rob McKenna gets a lot of complaints from his state's consumers in a year's time. But the many complaints generated by DirecTV in recent years made him sit up and take notice.
Washington became the first state to file suit against DirecTV, the nation's largest satellite television company, over allegations of unfair business practices. Now, the company has agreed to make restitution and pay $14.25 million to settle Washington's complaint and a separate action filed by 49 states and the District of Columbia.
"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," McKenna said.
California Attorney General Jerry Brown said, "DirecTV won customers by offering special deals with hidden costs, and also extended customers' contracts without telling them. With this settlement, DirecTV will reimburse customers and change its sales and advertising practices to comply with the law."
Thousands of complaints
McKenna said about 2,000 Washington residents have complained to the Attorney General's Office about DirecTV.
A key issue was DirecTV's requirement that new customers commit to a two-year equipment lease and programming contract. The states alleged that the contracts included numerous, sometimes undisclosed fees and 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.
- 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, the states alleged.
Rebates were another problem, according to Washington's suit. 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 suit alleged.
Under the settlement:
- DirecTV will not impose a cancellation fee on a consumer who ends service because of a recurring problem that can't be fixed.
- 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.
- DirecTV can't require consumers to enter into a new or extended contract when simply replacing or repairing defective equipment.
- The company must obtain a customer's express consent to the new or additional term.
- 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.
DirecTV allegedly failed to disclose that the company's least expensive package of $29.99 per month is available only to customers who meet certain financing conditions and agree to have the costs automatically charged or debited to them. The settlement requires that ads disclose if an offer is contingent on a consumer's creditworthiness.
People with unresolved complaints about conduct that occurred after Jan. 1, 2007, may be entitled to restitution. They have until June 9 to apply for a refund, either by contacting DirecTV or their state attorney general's office.
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