(Direct Newsline)—AOL, Inc. has agreed to pay $1.25 million to resolve a New York State probe into complaints that its telephone reps failed to honor customers’ cancellation requests.

The settlement, announced yesterday by New York State Attorney General Eliot Spitzer, also requires that the online giant change the way it rewards employees for dissuading subscribers who call to cancel.

Spitzer’s office said it launched the inquiry after receiving roughly 300 consumer complaints. In many cases, subscribers were retained without their consent, the office alleged.

“This agreement helps ensure that AOL will strive to keep its customers through quality service, not stealth retention programs,” said Sptizer said in a statement.

As part of the agreement, AOL will pay $1.2 million in penalties and $50,000 in investigative costs. In addition, it will repay New York customers for up to four months of improper post-cancellation charges.

Moreover, the company has 60 days to eliminate its program of rewarding bonuses based on minimum “save rates.”

And it will implement third-party verification of member’s consent to continue services. This will be done in increments, with 100% compliance expected by next June.

AOL spokesperson Nicholas Graham said that these changes will “increase quality assurance” at the firm, and they will be made nationwide, not just for New York customers.

According to the settlement document, AOL reps were awarded generous cash incentives if they saved 49% of the subscribers who called to cancel. Until last August, the percentage was 48%.

Employees who failed to make the save rate were referred for additional training, or deemed ineligible for promotion, and they did not receive bonuses, the document continues.

This system, in which reps could earn tens of thousands of dollars, “had the effect of employees not honoring cancellations, or otherwise making cancellation unduly difficult for consumers,” according to Spitzer’s office.

In general, AOL’s retention program is based on finding the “sweet spot” that will appeal to individual subscribers, and is similar to others in the online industry, Graham said. “It’s a good program because it speaks to addressing member concerns,” he added.

Graham declined to specify how bonuses will be allotted without the save rate, and added that the revised program is “a work in progress.”

Earlier this year, AOL paid $75,000 to Ohio to cover the costs of an inquiry into its online membership cancellation processes. It also provided a small number of refunds to consumers.

In 2003, AOL signed a consent decree with the Federal Trade Commission regarding the alleged billing of subscribers after they had asked to cancel their subscriptions. According to the FTC, the settlement required that AOL send confirmation notices to subscribers who were retained after calling to cancel. In addition, the company made changes in its rebate programs.

AOL Inc. has agreed to pay $1.25 million to resolve a New York State probe into complaints that its telephone reps failed to honor customers’ cancellation requests.

The settlement, announced today by New York State Attorney General Eliott Spitzer, also requires that the online giant change the way it rewards employees for dissuading subscribers who call to cancel.

Spitzer’s office said it launched the inquiry after receiving roughly 300 consumer complaints. In many cases, subscribers were retained without their consent, the office alleged.

“This agreement helps ensure that AOL will strive to keep its customers through quality service, not stealth retention programs,” said Sptizer said in a statement.

As part of the agreement, AOL will pay $1.2 million in penalties and $50,000 in investigative costs. In addition, it will repay New York customers for up to four months of improper post-cancellation charges.

Moreover, the company has 60 days to eliminate its program of rewarding bonuses based on minimum “save rates.”

And it will implement third-party verification of member’s consent to continue services. This will be done in increments, with 100% compliance expected by next June.

AOL spokesperson Nicholas Graham said that these changes will “increase quality assurance” at the firm, and they will be made nationwide, not just for New York customers.

According to the settlement document, AOL reps were awarded generous cash incentives if they saved 49% of the subscribers who called to cancel. Until last August, the percentage was 48%.

Employees who failed to make the save rate were referred for additional training, or deemed ineligible for promotion, and they did not receive bonuses, the document continues.

This system, in which reps could earn tens of thousands of dollars, “had the effect of employees not honoring cancellations, or otherwise making cancellation unduly difficult for consumers,” according to Spitzer’s office.

In general, AOL’s retention program is based on finding the “sweet spot” that will appeal to individual subscribers, and is similar to others in the online industry, Graham said. “It’s a good program because it speaks to addressing member concerns,” he added.

Graham declined to specify how bonuses will be allotted without the save rate, and added that the revised program is “a work in progress.” Earlier this year, AOL paid $75,000 to Ohio to cover the costs of an inquiry into its online membership cancellation processes. It also provided a small number of refunds to consumers.

In 2003, AOL signed a consent decree with the Federal Trade Commission regarding the alleged billing of subscribers after they had asked to cancel their subscriptions. According to the FTC, the settlement required that AOL send confirmation notices to subscribers who were retained after calling to cancel. In addition, the company made changes in its rebate programs.