Vonage has agreed to pay $100 million to resolve a Federal Trade Commission (FTC) lawsuit that alleges the Holmdel-based cloud communications company failed to give customers an easy way to cancel their internet-based telephone services and charged them excessive fees.
Under the terms of the settlement announced Nov. 3, in which Vonage did not admit nor deny any wrongdoing, the company must make its cancellation process simple and transparent as well as offer clear disclosures about recurring charges.
The resolution was reached the same day that the FTC filed a complaint in U.S. District Court in New Jersey claiming that Vonage made it easy to sign up for accounts, but created significant obstacles to deter and prevent customers from leaving.
“Since at least 2015, Vonage has failed to provide a simple method for customers to cancel their telephone services, employing a panoply of hurdles, sometimes referred to as ‘dark patterns,’ which compound to deter and prevent customers from stopping recurring charges,” the FTC said.
Vonage allowed cancellation requests to be handled only by phone and deliberately made its customer service phone numbers difficult to find and navigate, according to the FTC.
The suit also claims customers were often dropped, forced to wait on hold for long periods of time and sometimes ignored, while those who reached an agent were often “subjected to aggressive sales pitches intended to prevent them from closing their accounts.”
Over the years, the federal agency said it fielded hundred of complaints from customers who described Vonage’s cancellation process as an “endless loop,” “a scam” and “ridiculous.”
In a statement, Samuel Levine, director of the FTC’s bureau of consumer protection, said, “Today the FTC delivers on our commitment to protect consumers from illegal dark pattern tactics by companies that prevent consumers from cancelling their services. This record-breaking settlement should remind companies that they must make cancellation easy or face serious legal consequences.”
According to the FTC, the $100 million will be distributed as refunds to customers harmed by Vonage’s actions.
A representative from Vonage did not respond to a request for comment by press time.
Though Vonage was acquired earlier this year by Swedish telecom equipment maker Ericsson, it continues to operate as an independent unit as per the terms of the $6.2 billion deal.
This isn’t the first time Vonage has faced a lawsuit over its practices. In 2009, the company paid $3 million to settle a complaint filed by attorneys general in 32 states accusing it of tacking on extra fees and charging customers even after they cancelled services.