AOL agrees to pay $1.25 million to settle cancellation complaints


For exasperated customers who have tried to cancel a service to no avail, an explanation may be at hand. A settlement reached yesterday with America Online established that some sales representatives receive bonuses to keep consumers from leaving.

AOL agreed to pay $1.25 million in penalties and to refund some customers' subscription fees after New York Attorney General Eliot Spitzer accused the country's largest Internet service of making it unduly difficult for customers to drop the service.

AOL admitted no wrongdoing in the settlement but said it would no longer tie employee bonuses to success in deflecting cancellation requests. According to Spitzer's office, internal office brochures promoted how employees could earn a bonus as high as $3,115 a month by recording 975 "saves."

In New York state, where Spitzer is running for the Democratic gubernatorial nomination, AOL's customers and former customers can receive refunds for as much as four months of charges if they tried unsuccessfully to cancel their service.

"This agreement helps ensure that AOL will strive to keep its customers through quality service, not stealth retention programs," Spitzer said, adding that his office had received 300 complaints.

The penalties will barely put a dent in AOL's earnings, which were $550 million in the second quarter alone. But the company will have to sacrifice a bonus program aimed at keeping its 21 million subscribers, who pay $14.95 or $23.90 a month for their Internet connection.

AOL, a subsidiary of Time Warner, has steadily been losing customers to faster and cheaper competitors and is restyling itself as a Web portal like Yahoo.

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