Early Termination Fees: Contracts Inadvertently Extended

New York, NYDespite company promises about prorating cell phone early termination fees, many consumers still report that they are being charged outrageous fees for canceling contracts that they thought had already expired.

Jasmine K. (not her real name) says she had a great experience with Sprint—right up until her phone stopped working properly. She started her contract in 2003 or 2004 and says her service was fine. Then, in April 2007, she got a new phone and suddenly she had difficulty receiving and sending text messages.

"Sprint couldn't resolve the issue," Jasmine says. "I was paying $15 a month for that extra service and it wasn't working. At first the problem was sporadic but it got worse over the summer and fall. Then, I started receiving text messages in the middle of the night. I would receive a text message for freelance work at three in the morning. It was affecting my work and friendships. I went in and changed the phone, but I still continued to have issues so I got fed up and went to T-Mobile. Then, in January, I received a bill for $155.90 for canceling my contract. I wasn't aware that I was still in a contract.

"I haven't paid the bill yet. I've been trying to contact them since I received the bill. I tell them I want proof of the contract but they say they don't have written proof because the contract was verbal. I signed up in 2004, so how could I be under contract still? Am I just supposed to take their word that I have a contract with them and owe them money?"

Alex M. says he faced a similar problem with T-Mobile, although he wound up paying his early termination fee. He says he started his contract three or four years ago when he lived in Las Vegas. However, he moved to San Diego where he experienced reception problems. "San Diego is hilly, so I had coverage problems, which I reported to T-Mobile," Alex says. "On the drive to work, I had problems, at home and in my office I had poor reception. But, they kept saying that there would be new towers in my area soon so I decided to wait. Finally I had enough. My business partner is on Verizon and drove with me one day to show that he had no reception problems. So I decided to switch to Verizon."

Alex tried to cancel his T-Mobile account, thinking that his contract was expired. However, because his wife got a new phone, she had inadvertently extended her contract for two years. "She didn't know that it would extend her contract," Alex says. "But they say she okayed it when she bought the phone. They don't have proof that she extended her contract, but because she got the phone for $70.00 that was enough. They should make you aware of what you're getting into."

Furthermore, Alex had unknowingly extended his contract almost two years before when he got a new phone, even though he paid $300 for that phone. So he also had three to four months left in his contract.

When he phoned T-Mobile, Alex says he was told that he could continue with the lowest contract fee, $29 per month, for the remaining months of his contract. He decided that since that was cheaper than paying $200 per phone to terminate his contract, he would continue with the contract but not use the phone.

In December, Alex received a bill for $400, the cost of two early termination fees. "I called T-Mobile right away and told them I did not cancel my contract, I would continue paying the $29 per month, but they told me that they had no notes in their system that I was doing so. I did not ever tell them I would cancel my phone.

"I was very unhappy because I felt like I was duped into something there. I understand the idea of contracts. I had a deal in place and they have still billed me, and I valued my credit so I paid it. I felt like I had no choice. People need to just keep their eyes open. It's not even what you're signing anymore, it's what you're doing. It's crazy that you can accept things without actually knowing you're accepting them."