Verizon Announces Changes But Companies Still Charge Early Termination Fees

Dallas, TXVerizon has announced that it is ending the practice of extending customer contracts when customers make changes to their cell phone plans, which will affect how early termination fees are charged. The practice will end on Sunday, October 7, 2007. After that date customers will have the ability to change their voice and data calling plans without the company adding an extra two years onto their contracts.

Prior to this, customers who made changes to their calling plans unknowingly had extra time added to their contracts. When they tried to cancel their contracts, believing the contracts to have expired, they were charged [early termination fees].

Last week, Minnesota Attorney General Lori Swanson filed a lawsuit against Sprint Nextel for adding time to customer contracts without customer authorization. The suit alleges that the practice violates Minnesota's consumer fraud and deceptive trade practices act. In some cases, making even minor changes to a cell phone plan such as increasing minutes, led to contract extensions. Early termination fees can cost up to $250 per phone line.

Verizon previously announced that it was prorating its early termination fees, so that people who cancel with less time remaining on their contracts pay a lower termination fee than those who only recently started their contract. Many consumers list the early termination fee as their number one complaint with the cell phone industry. The fee is generally charged even if a customer cancels a contract because of poor cell phone service.

In addition to early termination fees and automatic contract extensions, other ridiculous industry practices include fees for requesting paper bills and charges for not upgrading phones.

Although most cell phone companies charge a termination fee of between $175 and $250 per phone line, some dealers may also charge their own termination fee. People who purchased their cell phones from those dealers could pay an additional fee of up to $400 per phone line. Furthermore, early termination fees are generally charged per phone, meaning that someone with a family plan could pay $800 or more if he or she is trying to cancel a four-phone family plan.

Customers upset about early termination fees have filed lawsuits against cell phone carriers, alleging the practice amounts to customer abuse. The plaintiffs claim early termination fees are actually penalties that prevent customers from leaving their cell phone carrier. Lawsuits have been filed against T-Mobile, Verizon Wireless, Sprint and Nextel (which now forms Sprint Nextel).

T-Mobile tried to have a class action lawsuit brought against it dismissed, arguing that any disputes must be settled in [arbitration]. However, a judge ruled that the arbitration clause was unconscionable and not enforceable, effectively allowing the class action lawsuit to go ahead. More class action lawsuits are likely forthcoming as rulings in the initial lawsuits are reported. A judge's ruling in one state will certainly have an impact on whether class action lawsuits are filed in other states against cell phone companies.

Some advocates argue that allowing customers to cancel their contract without a fee after they receive their first bill would enable customers to ensure they receive decent phone service. This would also enable customers to look for unanticipated hidden fees that may appear on cell phone bills.

There are people who defend the cell phone industry, saying that customers are at fault for not properly reading or understanding their contracts. However, is it fair that a cell phone company should get $200 or more from a customer after providing poor service or making repeated billing errors? Since when is it okay for a company to continue making money off its customers while failing to provide adequate service?