Cell Phone Termination Fees: States Consider Consumer Protection

Los Angeles, CAThe California State Senate will vote on legislation designed to protect cell phone users in California from early cell phone termination fees and other fraudulent cell phone industry practices. California is one of a number of states that are starting to take action against cell phone companies and their abusive practices.

The legislation would give cell phone users 30 days from signing their contract or ten days after receiving their first bill -- whichever is later -- to cancel their contract without paying termination fees. Furthermore, the legislation would make termination fees prorated so that customers who cancel their contracts later in the life of the contract would pay a smaller fee than those who cancel it early. Finally, the legislation would give customers the ability to cancel their contract with no fees if the phone company raises the contract rates during the life of the contract.

In Illinois a cell phone "lemon law" will now go before state Senate after passing the Illinois House. The legislation would allow people who receive three bad phones the right to cancel their contract with no termination fees.

Meanwhile an Arizona Senate panel voted earlier this year to give consumers the right to cancel their cell phone contracts with no termination fees if their cell phone carrier misrepresents the coverage area or gives the customer a phone with a history of problems and does not replace the phone.

Also earlier this year, a Rhode Island Representative proposed legislation that would prohibit cell phone companies from charging customers penalties or fees for canceling their cell phone contract. "The early termination fee has been established by the cell companies as a means to prevent customers from switching to another carrier," Representative John J. DeSimone said. "In that respect, I consider it an unfair trade practice."

Cell phone early termination fees not only cost consumers money, they prevent consumers from switching to new carriers if their service is poor. In August 2005, the Massachusetts Public Interest Research Group released a national poll, which showed that 47% of consumers "would have or would have considered switching service if not for the contract termination charge. In addition [MASSPIRG] found that the early termination charges cost cell phone consumers $4.6 billion from 2002-2004 (cost to consumers who switched plus potential and lost savings).

Some customers, fed up with poor treatment by their cell phone companies, have taken matters into their own hands and filed lawsuits against the phone carriers. Last year, a class action lawsuit was filed against Sprint Nextel and Verizon Wireless, alleging the companies charge ridiculous early termination fees. Attorneys in the lawsuit argue that the fees are higher than what is "necessary to compensate the carriers for their investment in the lost customer."

If you cancelled your cell phone contract early you may be eligible to recover fees you paid to cancel the contract, especially if the contract was cancelled because your carrier misrepresented its service area or provided poor cell phone service. Contact a lawyer to discuss your options.