DirecTV Agrees to Change Business Practices

Washington Attorney General Rob McKenna gets a lot of complaints from his state's consumer in a year's time. But the complaints generated by DirecTV lately made him sit up and take notice.

McKenna and Washington became the first to file suit against DirecTV, the nation's largest satellite television company, over allegations of unfair business practices. Now, the company has agreed to make full restitution and pay more than $14.25  million to the 49 states and the District of Columbia who were parties to the action.

 "Under our settlement, DirecTV agrees to disclosures that will help consumers know exactly what they're signing up for so that there are no painful surprises," McKenna said.

"DIRECTV won customers by offering special deals with hidden costs, and also extended customers' contracts without telling them,"California Attorney General Edmund G. Brown said. "With this settlement, DIRECTV will reimburse customers and change its sales and advertising practices to comply with the law."

DirecTV has also been a source of complaints from consumers contacting ConsumerAffairs.com. As of today, the website had received 397 complaints in the last 12 months.

"I cancelled our account with DirecTV and they sent out the boxes for us to send back our three receivers," Anthony of Jupiter, Fla., told ConsumerAffairs.com. "We had completed our contract with them just wanted out from under DirecTV as their prices kept raising. We mailed them in and never thought any more about it until I checked my account and found they had billed my account for $272.13 for one of the HD receivers. After many phone calls they agreed that all three receivers had made it into their warehouse but it appears they 'lost' one box and could not find it to give me the appropriate credit."

Refund process

The California-based company agreed to resolve customer complaints, including providing refunds if needed, and to include new disclosures in its advertisements and when customers sign up for service.

Unresolved complaints sent to DIRECTV or the state Attorney General in the state where the consumer resides that involve conduct addressed in the settlement and occurred after January 1, 2007 are eligible for the restitution program.  Additionally, consumers can file a complaint with DIRECTV or their state Attorney General by June 9, 2011 to be considered for the restitution program as long as the complaint is about activity that occurred after January 1, 2007. 

DIRECTV will attempt to resolve the complaints with consumers.  If the complaint cannot be resolved, DIRECTV shall inform the consumer that the complaint can be resolved by a Claims Administrator and mail a Claim Form to the consumer.  The Claims Administrator will then resolve the dispute between the consumer and DIRECTV.

For additional information, consumers may visit www.directv.com/ag or call 1-800-DIRECTV or their Attorney General's office.

A key issue of the suit was DirecTV's requirement that new customers to commit to a two-year equipment lease and programming contract. The states' suit alleged the contracts included numerous, sometimes undisclosed fees. The state also alleged that the company automatically renewed annual sports programming without adequate disclosures, failed to tell consumers they would be billed at the conclusion of "free trials" of special movie channels, and unfairly extended the terms of consumers' contracts when DirecTV repaired broken equipment.

Consumers often weren't aware of the terms or that DirecTV would charge them up to $480 if they canceled before the end of the first two years. Even some customers who weren't able to use the service because of reception problems or faulty equipment were charged penalties.

Rebates were another problem. In order to obtain a promotional rate, customers had to affirmatively request a rebate. Customers who submitted the rebate form after installation could be charged full price for their service for up to two months. Those who failed to request the rebate within 60 days of an order were charged the full price indefinitely - even if DirecTV failed to adequately inform them of the need to submit the form, the state's suit alleged.

Under the settlement:

• DirecTV will not impose a cancellation fee on a consumer who ends service because of a recurring problem that can't be fixed.

• The company must clearly disclose all material terms in its advertisements and prior to any sale. The disclosures must include the cost of the service, the contract length, additional charges for HD or DVR equipment, cancellation penalties, whether a promotional price is conditional on a rebate, whether an offer requires a particular payment, and other pertinent details. Extremely important disclosures, such as the requirement for a rebate, the required term of the consumer's commitment and the period the promotional price will be charged, must be disclosed in direct proximity to the price itself.

• DirecTV can't require consumers to enter into a new or extended contract when simply replacing or repairing defective equipment.

• The company must obtain a customer's express consent to the new or additional term.

• DirecTV must disclose whether a rebate is required to obtain the promotional price. If the consumer's first bill does not reflect the price agreed to at the time of sale, DirecTV must either provide that price or cancel the contract without penalty, if requested.

• If the price discrepancy is due to the consumer's failure to obtain the rebate price, DirecTV must facilitate the rebate. Additionally, the company can't represent that a consumer will receive "cash back as part of a promotion, when the consumer actually will receive a bill credit.

DirecTV allegedly failed 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 to them. The settlement requires ads to disclose if an offer is contingent on a consumer's creditworthiness.