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Lawsuit Accuses AOL of Illegal Billing

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Dec 2, 5:05 PM (ET)

By JIM SUHR

BELLEVILLE, Ill. (AP) - A lawsuit seeking to potentially cover hundreds of thousands of America Online Inc. subscribers accuses the Time Warner Inc. (TWX) unit of illegally billing customers by creating secondary accounts for them without their consent.

The lawsuit, filed last month in St. Clair County Circuit Court on behalf of 10 AOL customers in six states, claims the company confused and deceived customers about the charges, stalled them from canceling unauthorized accounts and refused to return questioned fees.

"AOL exploits its subscribers' confidential billing information to unlawfully generate additional revenue by charging subscribers for additional membership accounts that they neither order nor request," the lawsuit alleges, calling the scheme "common, uniform and continuing."

The lawsuit, seeking class-action status, mirrors more than a dozen other actions that have been pending in state and federal courts throughout the country, said Stuart Talley, a Sacramento, Calif., attorney representing the plaintiffs in the Illinois lawsuit. All of the federal cases were consolidated in California two years ago, Talley said.

Nicholas Graham, an AOL spokesman, said the Dulles, Va.-based company considers the Illinois lawsuit "a legal rehash that has as much legal value as refiling your personal income taxes from four years ago."

"The important thing is that we deny the allegations now as we've done several times, and we will defend this case as we have other cases accordingly," he said, noting that AOL "takes extraordinary efforts to resolve any issues the members raise." 

"We have safeguards in place now that prevent unauthorized charges, and we have credit and refund policies that do justice to the consumer," he said.

The lawsuit also names ICT Group Inc. (ICTG), a Newtown, Pa.-based outsourcing company AOL retained to respond to customer complaints and billing matters. Messages with ICT seeking comment were not immediately returned Friday.

Plaintiffs include an Illinoisan, two Californians, three Tennesseans, a West Virginian, two Alabamans and a New Yorker.

No hearing date has been set on the Illinois case, which accuses AOL of violating Illinois' Consumer Fraud and Deceptive Business Practices Act.

The latest lawsuit alleges that AOL misrepresented that subscribers may add up to seven different screen names to a membership account for free. But AOL "in many instances" spun off those screen names into additional membership accounts without the subscribers' knowledge, then charged and collected a separate monthly fee for each account.

The company requires members to pay charges and fees by credit card, electronic withdrawals from their bank accounts or by adding to their telephone bills, giving subscribers no opportunity to review a bill before making a payment, the lawsuit claims.

To maintain its customer base, according to the lawsuit, AOL has instructed customer-service contractors such as ICT to prevent AOL subscribers from canceling their accounts "at all costs" and to resist giving refunds. Customers who complain are offered at least one month of free AOL Internet service instead of refunds or credits, while "unsatisfied customers who insist on canceling or terminating their AOL memberships are obstructed and delayed from doing so," the lawsuit claims.

New York-based Time Warner - the world's largest media company - has been holding exploratory talks with companies including Microsoft Corp. (MSFT) about a potential investment in or sale of AOL, which has become a hot property because of its booming advertising sales and ability to draw in large audiences online.

AOL long was seen as a drag on Time Warner due to the steady decline of the dial-up Internet access business. But in recent months AOL successfully has been revamping its business model, moving away from the subscription business and selling more online advertising.

Peace.