Vonage on the Hook for $100 Million in Refunds to Customers

Vonage is what used to be known as a VoIP (Voice over Internet Protocol) provider — an internet telephone company, in other words. Using the internet instead of traditional telephone connections, VOIP providers can often offer lower-priced service than their competitors.

But consumers have complained that their Vonage service is often loaded down with junk fees and that they have a hard time trying to cancel the service. The Federal Trade Commission (FTC) investigated those complaints and now Vonage will be required to pay $100 million in refunds, make its cancellation process simpler and stop charging consumers without their consent.

“Today the FTC delivers on our commitment to protect consumers from illegal dark pattern tactics by companies that prevent consumers from cancelling their services,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “This record-breaking settlement should remind companies that they must make cancellation easy or face serious legal consequences.”

According to the FTC’s complaint, the company bills its customers on an automatic basis every month, either by charging a credit or debit card or withdrawing money from a customer’s bank account directly. Consumer accounts ranged from $5 to around $50 each month, while business accounts could cost up to thousands of dollars each month. In many cases, the company signs customers up using “negative option” plans that begin with a free trial, but require the customer to take action to avoid being charged.

The FTC’s complaint alleges that while New Jersey-based Vonage has provided numerous ways to easily sign up for their plans, it has made the cancellation process markedly more difficult, leaving consumers and businesses on the hook for services they no longer want. Vonage’s practices, the complaint alleges, harmed consumers in numerous ways, specifically by:

• Eliminating cancellation options: Despite allowing its customers to sign up for services online, over the phone, and through other venues, the complaint alleges that starting in 2017, Vonage made the decision to force customers to cancel only by speaking to a live “retention agent” on the phone. The complaint notes that this practice runs counter to Vonage’s own advice to its clients not to “frustrate customers by requiring them to contact you for support that should be available on a self-service basis” and that “[i]t should be just as easy to return your product as it is to buy it.”

• Making cancellation process difficult: In addition to forcing customers into one cancellation method, it made that method difficult. The company created significant cancellation hurdles, including by making it difficult to find the phone number on the company website, not consistently transferring customers to that number from the normal customer service number, offering reduced hours the line was available and failing to provide promised callbacks. The complaint cites one internal Vonage email saying customers were “sent in a circle when they want to downgrade or remove the service.”

• Surprising customers with expensive junk fees when they tried to cancel: In many cases, customers who are able to access the cancellation line are told they will have to pay an unexpected early termination fee that was not clearly disclosed when they signed up for Vonage service. In some cases, these fees were in the hundreds of dollars.

• Continuing to charge customers even after they canceled: Customers who managed to speak to an agent and request cancellation often found that their accounts continued to be charged. Even when they contacted Vonage to complain, they received only partial refunds of the money they were charged without authorization.

Enforcement Action

As a result of the FTC’s action, Vonage has agreed to a proposed court order that would require it to:

• Stop unauthorized charges: Vonage will be required to have consumers’ express, informed consent to charge them.

• Simplify cancellation: Vonage will be required to put in place a simple cancellation process that is easy to find, easy to use, and will be available through the same method the consumer used to enroll (e.g., website, email address, or other application).

• Stop using dark patterns: The order prohibits Vonage from using dark patterns to frustrate consumers’ cancellation efforts.

• Be upfront with consumers about subscription plans: The order requires Vonage to be upfront with customers about the terms of any negative option subscription plans, including any action that must be taken to avoid being charged and timeline in which that action is required.

• Pay $100 million to be used for refunds: Vonage would be required to turn over $100 million to the FTC to be used to provide refunds to consumers.