Vonage agrees to pay $100 million to settle U.S. FTC lawsuit

Show attendees make free calls at the Vonage booth during the Consumer Electronics Show (CES) in Las Vegas, Nevada January 8, 2008. REUTERS/Steve Marcus

WASHINGTON, Nov 3 (Reuters) - Communications firm Vonage agreed to pay $100 million to resolve a Federal Trade Commission (FTC) lawsuit that alleged it had failed to provide a simple method for customers to cancel their telephone services and imposed "junk fees," the agency said.

Vonage, which was acquired by Ericsson (ERICb.ST) earlier this year in a $6.2 billion deal, had created significant obstacles to deter and prevent customers from stopping recurring charges, the FTC said in a lawsuit and proposed settlement in U.S. District Court in New Jersey.

Vonage on Thursday said it was "in the best interests of our customers, partners and employees to come to a settlement."

The $100 million will be turned over to the FTC to be used to provide refunds to consumers.

"Vonage made it easy to sign up but much harder to cancel, sometimes trapping consumers in an endless loop of call transfers," FTC Chair Lina Khan said on Twitter. "In some cases Vonage kept charging customers, or hit them with hidden early termination fees."

In addition to the financial settlement, the company agreed to offer clear disclosures about any recurring charges and to offer a simple method to stop any recurring charge or avoid increased charges, according to court documents.

It requires that a consumer who signed up for a service on the phone or via a mobile phone application be allowed to use that same method to cancel the service, the document said.

Khan said on Twitter that the settlement was in line with the FTC's policy statement last year in which the agency "made clear the law requires businesses to ensure sign-ups are clear, consensual, and easy to cancel - and that @FTC would be cracking down on those who don't comply."

Reporting by David Shepardson and Diane Bartz; Editing by Bill Berkrot

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