After being accused of making it difficult to cancel its service and failing to fully disclose fees, Vonage reached a settlement with 32 states yesterday.
Under the terms of the agreement, Vonage must pay out $3 million as well as change the language it uses in its marketing.
The crux of the complaint was the lack of clarity surrounding the free services, trial periods and money-back guarantees Vonage offered. "Companies like Vonage have deliberately turned the whole notion of 'customer service' on its ear, so that consumers are even more frustrated and confused after they call the company than before," said Montana Attorney General Steve Bullock, in a statement. "That's not good enough, and this settlement will hold Vonage to a higher standard -- a standard of genuine customer satisfaction it should have been striving to meet without our intervention." (Download complete settlement.)
Among the complaints was the fact that consumers were required to purchase other equipment to take part in the "free" service, consumers who cancelled had to pay shipping to return equipment during this "free" trial period, and other fees and charges were not refunded upon cancellation within the "money-back guarantee" period.
Vonage is offering refunds to eligible consumers who filed complaints regarding unauthorized charges between January 2004 and March 16, 2010.
Moving forward, it must now revise its marketing disclosures associated with its equipment and service. Additionally, its practice of offering incentives to staff for convincing consumers not to cancel will now be limited.
"Vonage fully cooperated in the investigation and, as part of the settlement, has agreed to maintain or implement enhancements to its business practices that will improve customer experience and satisfaction, many of which the company implemented prior to completion of the settlement," said the company in a statement.
The statement added that the charges related to the payment to the states and the refunds were previously reflected in the company's financial results and that "no finding of any violation or wrongdoing was made by the states in connection with the investigation or settlement."
Vonage spent $133 million advertising its services last year and $73 million for the first eight months of this year, per Nielsen. This excludes spending online where the company is very active. TBWA\Chiat\Day, New York, is agency for Vonage.