According to Washington's Attorney General Rob McKenna, DIRECTV has generated more complaints from consumers than any other business this year -- 375 in 2009, and over 700 in the last three years. He claims it's time to do something about it. Accordingly, his office is suing the California-based satellite TV company for deceptive and unfair sales practices.
McKenna claims that DIRECTV has been luring new customers with ads for low-priced service, while burying multiple hidden fees and "gotchas" in the fine print of its contracts. Following a year-long investigation, the Attorney General's office filed suit for what McKenna claims are violations of the state's Consumer Protection Act.
"The miniscule 5.5 point fine print at the bottom of a DIRECTV advertisement is enough to give someone a migraine," McKenna said. "Even if consumers used a magnifying glass, they still wouldn't discover that the 'good deal' they were promised came with potential expensive pitfalls."
Assistant attorney general Paula Selis said one key issue was the company's requirement that new customers commit to a two-year equipment lease and programming agreement.
"Consumers aren't aware of the two-year contact until after they've signed up for service," Selis said. "They don't know that the monthly service charge will increase significantly after a year. They don't know that DIRECTV will charge them up to a $480 penalty if they cancel before the first two years. Customers who weren't able to use the service because of reception problems or faulty equipment were also charged penalties in some cases."
The Attorney General's office published a host of practices that they say are unfair to customers, including:
• Rebate terms: In order to obtain a promotional rate, customers sometimes have to submit a rebate. Customers who submit the rebate form after installation may be charged full price for their service for up to two months. Those who fail to return the rebate within 60 days of an order are charged the full price indefinitely -- even if DIRECTV failed to adequately inform them of the need to mail the form.
• Use of the term "free:" The company advertises "free" installation and upgrades such as an HD receiver, DVR receiver or premium channels such as HBO and Starz. In fact, customers may be required to pay monthly fees for the equipment. The premium channels are offered as a free trial that automatically converts into a paid subscription.
• Contract extensions: DIRECTV not only requires customers to agree to an extended contract at the beginning of service, but attempts to extend those terms even further. The company extends the length of contracts when customers require equipment repairs, upgrade equipment or move.
• Financing: DIRECTV fails to disclose that the company's least expensive package of $29.99 per month is only available to customers who meet certain financing conditions and agree to have the costs automatically charged or debited.
• Cancellation fees: DIRECTV offers customers a $5.99 monthly "Protection Plan" to cover equipment repairs. Customers who weren't even aware they are paying for the plan have been unfairly charged a $10 fee to cancel their enrollment.
• Retention of funds: Prior to selling programming, DIRECTV asks for a customer's Social Security number in order to perform a credit check. Customers who refuse to provide the number or whose credit is deemed insufficient are required to pay a $200-$300 deposit to obtain service. Those who cancel service prior to the end of their contract lose part of the deposit and may also be charged cancellation fees.
The Attorney General's Office is asking the court to compel DIRECTV to change its business practices, impose civil penalties and provide restitution for consumers.
Washington isn't the only state to sue DIRECTV for what it claims are bad business practices. California DIRECTV customers filed a class action lawsuit against the company over its practice of automatically debiting contract cancellation fees from their account, often without their knowledge or permission.
