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That's fucked up DH.
If this had happened in the US, there are probably about 6 different government agencies you can call to try and get things handled when you're ripped off like that.
Not to mention I just wouldn't pay the cancel fee or the bill. I would notify them in writing, registered mail, of my intent to cancel the contract for a breach on their end.
When they put the account in collections you sue them to have the blemish removed from your credit, for your attorney fees, and for "damage to your reputation" for tarnishing your credit temporarily.
But that's just me.
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