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AOL has reached a settlement with 48 states and the District of Columbia over their confusing cancellation policy.

The Time Warner Company has agreed to change its policy regarding its cancellation policy and will shell out $3 million to all the states involved for cost and fees, Reuters is reporting.

The settlement comes after users complained that AOL made it difficult for users to close their accounts and alleges that telephone customer service representatives received incentives for retaining customers who called to cancel their service.

The agreement includes making refunds to some customers as well as changing their billing policies.

"AOL is pleased with this settlement, as it codifies a number of changes that were already made by AOL to improve our service to our members and puts to rest any remaining issues related to our old access business model," an AOL spokeswoman said.

Under the agreement with the states AOL has to allow customers to use a Web site to cancel their accounts or use the free service. There are also tighter restrictions on incentives for customer service representatives who speak to customers on the phone and all cancellation calls are recorded.

"It is critical that consumers' rights be honored when they are cancelling a service," said Kentucky Attorney General Stumbo. "This settlement with AOL requires the company to honor these rights and prohibits it from making the cancellation process cumbersome, if not impossible, as it has in the past. My office will continue to fight for the rights of Kentucky consumers."