Sirius XM satellite radio last week settled claims attacking its business practices. Sirius XM is a satellite radio provider with over 26 million subscribers according to its website. It provides over 3.7M square miles of “seamless coast to coast” radio coverage.
Sirius XM’s business practices came under siege when state attorneys general accused it of making it hard for customers to cancel their subscriptions. Essentially, Sirius XM was being accused of being a “bad breaker-upper.” SeeSeinfeld, Season 8, Episode 10. Seinfeld fans will recall that Elaine was once set up in Season 8 with a man who was a habitual “bad breaker-upper.” Elaine was intrigued by this man, but he eventually broke up with her because he claimed she had a big head. But I digress. Sirius XM was investigated by 45 state attorneys general after consumers complained that the company:
- Made it difficult to cancel contracts;
- Failed to honor cancellation requests;
- Misrepresented that the customer’s service would be canceled or not renewed;
- Automatically renewed contracts without consumer consent or notice;
- Offered low introductory rates but applied higher ones; and
- Failed to provide timely refunds.
The investigations resulted in allegations that Sirius XM’s business practices were misleading, unfair, and deceptive in violation of state consumer protections laws.
Last week, Sirius XM sought to shed its reputation as a “bad breaker-upper” when it settled these allegations. The settlement resolved the claims against it regarding its advertising and billing practices. Under the settlement, Sirius XM will pay $3.8M to the states and provide additional restitution and reimbursements to eligible customers. As well, Sirius will make significant changes to its business practices.
Sirius XM has already implemented the following changes to its business practices as part of the settlement:
- It will clearly and conspicuously disclose all terms and conditions at the point of sale. This will include billing frequency, term length, automatic renewal date, and cancellation policy.;
- It will make no misrepresentations about its available plans in advertisements (Why does one have to agree to not do this? Perhaps because one was once a “bad breaker-upper.”);
- It will provide advance notice via snail mail or email about upcoming automatic renewals for plans lasting longer than six months;
- It will revise its cancellation procedures to make it easier for consumers to cancel (i.e. don’t tell Elaine she has a big head); and
- It will prohibit incentive compensation for customer service representatives based solely on “saves” or retaining current customers who attempt to cancel.
So, how does a firm avoid being accused of being a “bad breaker-upper”? How does a firm avoid the pricey mistakes made by Sirius XM? Examine the settlement outlined above and analyze your firm’s customer separation practices and procedures. Search for ways to effectively retain current customers within the context of the law. At the end of the day, if someone does not want to be your customer any longer, let them go. Once the decision has been made by the consumer to sever the relationship, a timely and hassle free “break up” can go a long way in stabilizing customer satisfaction. If it was an easy break up for the consumer, and your firm truly provides the best product/service in the marketplace, that consumer will be more likely to return to you later. If the break up is messy, and you are a “bad breaker-upper,” that consumer may never return despite your superior product and service.