Oregon Attorney General Hardy Myers today announced settlement terms with Colorado-based EchoStar Corp. regarding its Dish Network sales practices. The Assurance of Voluntary Compliance (AVC) requires EchoStar to clearly and conspicuously disclose the terms of its satellite television service and the financial obligations customers assume prior to the purchase or lease of a Dish Network system. Moreover, for a period of 5 years, Echostar will be unable to enforce contract terms and obligations against customers who claim not to have received pre-sale disclosure of the term unless Echostar has documentary evidence that the customer did in fact receive the pre-sale disclosure. In addition, the agreement prevents Echostar from assessing a termination penalty against customers who must cancel because of nursing home placement, death, catastrophic loss of the customer's residence, or loss of signal. Finally, EchoStar will pay the 13 participating states $5 million in restitution and fees.
Oregon, one of the lead states in the investigation, initiated the query after receiving complaints from over 125 Oregonians. Disgruntled customers reported that EchoStar assessed a $240 termination fee upon cancellation of their one-year contracts, yet never disclosed the fee in the course of the Dish Network sign up. Customers further complained that EchoStar failed to refund prepayments and automatically charged the undisclosed fees to credit cards and bank accounts without the consent of the customer. California, Colorado, Connecticut, Florida, Georgia, Illinois, Louisiana, Minnesota, New Jersey, New York, and Wisconsin join Oregon in the settlement.
"In our changing marketplace, consumers are being asked to sign long-term service agreements with regularity," said Myers. "The settlement with EchoStar establishes a crystal clear standard for integrity in these increasingly important transactions."
The settlement provides restitution for consumers wronged by EchoStar's practices and establishes important protections for current and future Dish Network consumers.
EchoStar is required to disclose clearly and conspicuously all of the fees that customers will be held liable for if they cancel during the term of a one-year contract. Further, the company must provide additional disclosures regarding the unique characteristics of satellite television when compared to traditional broadcast and cable television, including the availability and fees associated with acquiring local programming. Other disclosure requirements include:
All required fees: including required minimum programming fees, charges for receiving local channels, activation fees, standard installation fees, fees assessed for failure to return equipment, and fees associated with downgrading programming;
Automatic renewals for contract periods that extend beyond one month;
Federal, state and local rescission laws; and
Whether a dish advertised in a promotion is reconditioned and the circumstances under which it is free.
Additionally, the agreement requires EchoStar to disclose its no refund policies prior to accepting prepayment from customers - critical information for customers considering a long-term contract. The terms of the settlement include an array of other key consumer protections:
EchoStar must clearly disclose the charges that will be assessed to consumers' bank accounts or credit card accounts if payments are made through an Electronic Funds Transfer ("EFT");
Convenient cancellation service must be available to customers;
Establishment of a system for the prompt receiving and resolution of customer complaints; and
EchoStar must ensure that all installers are properly licensed and bonded under state law.
Lastly, under the terms of the settlement, customers may pay the remaining term of the contract rather than be subjected to the $240 termination fee. In addition, prior to entering into the final settlement agreement, the Attorneys General required Echostar to forgive the debt of customers who incurred the termination fee prior to December 31, 2001 and still owe the debt to Echostar. These customers will receive a letter from the company to assist in repairing any damage to their individual credit history.
Under the settlement, EchoStar agreed to pay the states a total of $5 million. Of this amount, $3 million will be used for consumer restitution and will be divided in an equitable manner among the states. The remaining $2 million is expressly designated for costs. Oregon, as a lead state, will receive over $480,000; $250,000 will be deposited in the state's Consumer Protection and Education revolving account with the remainder available to reimburse Oregon customers who paid a termination penalty, or did not receive a refund, and did not receive the necessary pre-sale disclosure. Oregonians who believe they may be eligible for a refund should contact the Department of Justice.
Consumers wanting information about consumer protection in Oregon may call the Attorney General's consumer hotline at (503) 378-4320 (Salem area only), (503) 229-5576 (Portland area only) or toll-free at 1-877-877-9329. Justice is online at www.doj.state.or.us.
Kevin Neely, Justice, (503) 378-6002