Some legislators are starting to fight against the improper charging of termination fees, but until legislation is passed, consumers will be stuck paying expensive termination fees in order to end their relationship with cell phone carriers that sometimes cannot even provide consistent cell phone service in the customer's own home.
When Jon Ross signed a contract for his cell phones in the spring of 2006, he didn't know that, in less than three months, he would have to pay $400 in early termination fees to cancel his contract, even though it was canceled because of poor cell phone service.
Jon says he researched cell phone carriers on the internet and chose T-Mobile because it had the best coverage in his area. "When you go to the website there is a coverage map. In my area, the coverage shows three bars which I thought was pretty good so I decided to go with T-Mobile."
However, Jon soon discovered that he wasn't receiving any cell phone service in his home.
He phoned T-Mobile to find out what the problem was. As it turned out, three bars on the coverage map actually mean that a customer should be able to make calls outdoors or in a car but may not have service in some buildings. "You have to run the mouse over their map legend to learn what the bars mean," Jon says. "But it doesn't say that anywhere on the website. It's not obvious that you have to do that. I thought three bars meant good coverage, but it actually meant that I couldn't use my cell phone in my own house."
Because his cell phone was important to business, Jon canceled his contract with T-Mobile. T-Mobile charged him $400 for early termination fees, even though Jon could barely use his cell phones indoors. "I didn't pay that right away," Jon says. "At first I paid the full bill for my use, but not the cancellation fee. Their service was terrible so why should I pay it? Finally they threatened me with collections so I had to pay the $400 or it would affect my credit."
Although it will not help Jon in Mississippi, proposed legislation may help Massachusetts consumers fight such ridiculous cell phone termination fees. Michael W. Morrissey, state Senate chairman of the Joint Committee on Telecommunications, Utilities, and Energy has proposed legislation that would make cell phone companies more accountable to customers.
In addition to forcing companies to issue regular reports detailing signal strength, dead zones, gaps in coverage and number of dropped calls (calls that end unexpectedly because of technical problems), the legislation would give customers like Jon who suffer from poor service the ability to end their contract without paying large termination fees. Instead, consumers would pay a pro-rated amount of the early termination fee, determined based on how long they have had service.
Customers would be eligible for this pro-rated termination fee if they had made five or more complaints in a month. Once they have done this they would be able to cancel their contract.
Cell phone termination fees can run anywhere from $170 to $300 and customers are usually required to pay the full amount, regardless of whether or not they are canceling their contract based on poor service.
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Late in 2006, Verizon Wireless became the first national cell phone company to pro-rate its early termination fee. The fee starts at $175 but is reduced by $5 for every month under the contract the customer completes.Last year, Verizon Wireless settled a class-action suit claiming that the company over-billed customers and engaged in deceptive business practices. Customers who were involved in the lawsuit received two vouchers in the mail for discounts on various Verizon products and services. Verizon was also required to make its fees and charges more clear to customers and eliminate previous charges that consumer advocates felt were unfair.
Other cell phone companies are now facing lawsuits arguing that early termination fees are illegal. Those include a lawsuit against T-Mobile USA, filed in November, 2006, which claims that T-Mobile's $200 early termination fee violates consumer protection laws in 13 states.
