Customers and Lawmakers Frustrated by Early Termination Fees

Austin, TXDespite some cell phone companies promising to prorate their termination fees, many companies are still charging outrageous fees when customers cancel their contacts. Now, customers are fighting back with cell phone early termination fees lawsuits and lawmakers are proposing consumer protection bills to limit how much companies can charge when customers want out of their contracts.

One customer says Sprint charged her a $200 termination fee per phone line, despite her having been a customer with the company for ten years. She says she decided to cancel her contract because of poor customer service, but Sprint is still charging her $200 for each of her three phone lines and is not prorating the fees. Another customer notes that he was charged $200 for a termination fee even though he was complaining about inappropriate charges on his phone. The customer says some of his phone bills have been over $300 a month, despite him not using his phone frequently.

Many customers have legitimate concerns about their cell phone carriers. Some note that they suffer from dropped calls and poor service areas. An article in the Daily Titan notes that a Cal State Fullerton student stays with AT&T because it has cheaper rates than other companies, but she deals with a lot of dropped calls including one dropped while she was on hold with the Financial Aid Office.

In fact, according to an article in the Baltimore Sun, cited in the Daily Titan, 47 per cent of cell phone customers would consider switching phone companies except for termination fees. Furthermore, the most common reason people want to cancel their contracts is poor reception.

In response to customer complaints about cell phone service, Senator Amy Klobuchar (D-Minn.) and Senator Jay Rockefeller (D-W.V.) have co-written a "Cell Phone Consumer Empowerment Act of 2007," a bill designed to protect cell phone customers. The bill would impose certain rules on cell phone companies, including limited, prorated "Early Termination Fees," 30 days to cancel contracts, no unauthorized fees or charges, and full disclosure of all contract terms and conditions.

One of the issues regarding disclosure of contract terms and conditions is that many customers do not realize that by making a change to their contract they are essentially entering into a new contract. The bill would prevent companies from extending a contract without the customer's agreement.

The practice of extending contracts without customer consent has led Minnesota Attorney General Lori Swanson to file a lawsuit against Sprint Nextel Corp. The suit alleges that Sprint Nextel's practice of extending contracts without adequate disclosure when customers make small changes to their cell phone contract violates Minnesota's consumer protection laws. A press release from Swanson's office notes that customers who made relatively minor changes to their contracts, such as adding minutes, replacing a phone, responding to offers of additional products or services, or receiving courtesy discounts were subjected to unwanted contract extensions. Furthermore, when customers tried to cancel their wireless service, many assuming their contracts had already expired, they were charged early termination fees of up to $200.

While senators debate the merits of a consumer protection bill and states file lawsuits against cell phone companies, some consumers are taking matters into their own hands and filing their own lawsuits. The lawsuits allege that early termination fees are illegal if customers are canceling their cell phone contract based on poor service. Furthermore, the suits argue that customers who cancel toward the end of a contract should not pay the same amount as those who cancel at the beginning of their contract. Many of the suits are either seeking or have been granted class action status.