Senator Introduces Bill to Limit Cell Phone Cancellation Fees

47

Comments

+ Add a Comment
avatar

Josiah Charley

It could be that Verizon simply took advantage of the financial times, at first. People didn't have enough money to buy a phone, so they would have had to make peace with that contract. But I can't find an explanation for changing the early termination fee from $175 to $350. It could be that due to the fact that there were a lot of them who signed the contract, they tried to get some more money. I wonder if they announced the clients before doing that. I'm glad I managed to get my cell phone with an htc inspire digitizer at the full price.

avatar

jmwalija

These Cell phone giants can afford to put a cap on ETF's to six  months rather than 2 yrs. Do they know what can happen in 2 yrs. With the ever changing and improving Technology who wants to hold on to a contract for that long. Come on Verizon, wake up. its not by expanding the time that you make money. Its by satisfying your customer base which in turn speaks volume for good servicemanship that your customer lists grow. With so many VOIP emerging on the market one sure way of staying in business is putting that 2 yr binding clause . What happened to good marketing startegies!

avatar

dbb10001

Paul, nice post. I wanted to respond by addressing, in particular, those people who are facing ETFs because their wireless service was too expensive so they had to end their contracts prematurely. For these people, avoid both the ETFs and the expensive plans by seriously cutting your current wireless costs; an intuitive but often realistically tough proposition. However, I work in the consumer advocacy division of the Houston-based company Validas, where we electronically audit and subsequently reduce the average cell bill by 22 percent through our website, http://www.fixmycellbill.com (and I'll add that 22 percent equates to over $450 per year for the average user).

You can find out for free if fixmycellbill.com can modify your plan to better suit your individual needs by going the website. Check out Validas in the media, most recently on Fox News at http://www.myfoxtampabay.com/dpp/consumer/conlaw/lower_cell_phone_bills_072409 .

Good luck to everyone reading on retaking control over your wireless expenses.

Dylan, Consumer Advocacy, FixMyCellBill.com

avatar

ubuntucuber

 i am not sure if the idea has been said, but my idea to improve this bill is to force cell phone carriers to state the full no-contract price along with the price with contract

~UbuntuCuber

avatar

Caboose

 Up here in Canuckistan they do. The larger font price is with a 3yr contract, and then the smaller font price they show either No contract, 1yr and 2yr price, or just the price w/o a contract.

 

-= I don't want to be dead, I want to be alive! Or... a cowboy! =-

avatar

P--Pav

This seems like a good bill, there should be a rider attached that tells consumers that reading the contract is a good idea too, that way the consumer doesn't forget that step.

avatar

MeTo

Read all you want you still won't understand completely these contracts confuse lawyers.

avatar

laurano

It's always like that... do you think MetroPCS is different with their $40 unlimited flat free plan? I mean if it's a flat fee can they again add on to it? And I read that you can actually use any cell phone with them. If all of this is true I will definitely be switching to them in the next few months.

avatar

Mr_Histamine

They're only raising the ETF on smartphones - so if you're the huge number of subscribers who don't have a smartphone, it'll still be $175 (I thought it was more than that...apparently, I haven't been reading my contract...).  $350 isn't a bad deal for a piece of high-tech equipment (an iPod classic is $100 cheaper, and does much less).  Still, they need to start prorating these ETFs; it should cost less to terminate as time progresses.

________________________________________________________________________________

Please deposit your pride, life, and other garbage in the receptacles at the back of the theater before you leave. Thanks!

avatar

FrancesTheMute

They do prorate it, but with the new, higher ETF, it will still cost you something like $125 if you change in the 23rd month, whereas before the hike, the fee nearly nothing.  Not sure why you would jump to another carrier in the 23rd month.

avatar

POMF2K

"Not sure why you would jump to another carrier in the 23rd month."

Indeed. . .

I'm so sick of hearing people whine about these fees.  Yes they are extortionate, but that is just one way these companies make their money.  And by the way, they have every right to do so.  American consumers think that they should be free to purchase a product (at a greatly subsidized price), then return it, used, because they weren't satisfied (regardless of the fact that there may have been nothing wrong with the product or service).  That is ridiculous.

Research your products and services before you purchase people.  And read the damn fine print.

avatar

Zazubovich

It amazes me how many people on the internet can find any excuse to justify corporations ripping people off.  The mafia never had it so good.  Apparently some folks missed the entirety of Federalism in civics class, or else willful ignorance is profitable for some folks that think they might get to be a Rockefeller one day.  Who takes a lawyer to Walmart to sign a phone contract?  Well, you better, if they can hose you at will with fee increases and poor performance.  Less government means more lawyers.

avatar

LVmonkey

More government means less lawyers. I'm by no means a communist, socialist or prescribe to anything else, however the point of lawyers is to deal with grey areas in laws. so the more maluable or debatable the laws the more lawyers ...and the more the system is prone to abuse (because so many people are involved in the governing over every little piece of law all the time).

Here's a hint, when the banks of the 'free market' world screwed the stock markets and all the worlds economies cried in pain, which countries came out the best? Hint, so far China is doing FAR better economically that the US. In fact, the US national debt is being shouldered by China.

How many laywers per capita do you think they have compared to the US? I think the lobbiests in the US have lulled Americans to believe the 'free market' is some how better with less regulations as to increase their own corporate profits/interests. And lo and behold, the world seems to prove that. Look at health care... need more examples?

More government means more regulations to frame those contracts. So you don't have to bring your lawyers because certain laws are already in place and are not there to be argued on an individual basis ad infinitum. Why do you think the wireless market/plans are SOOOOOOO much better in Europe? Is it because of the loose drinking laws? So tired of this arguement off of US media/forums... sheesh.

avatar

travispaul138

In law school one of the cases studied was over the definition of "chicken".  There are always grey areas in laws, lobbiest make sure of it.

avatar

DasHellMutt

Amen!

avatar

Velcrow

What excuse? Contract law is, well, just that - contract law. If you willfully enter into a contract with another entity it is binding. Nobody said it was fair. I doubt anyone even reads the contracts when it's right in front of their face. If there was a loophole that allowed you to provide service to your entire family under your contract for free, you know damn well you would take advantage of it. It is what it is. How hard is that to understand? If they're doing something illegal, then we can talk.

avatar

LVmonkey

for most countries you can't sign away your rights. there is generally a frame work of laws in place. in the US these frame works are MUCH more open to abuse then the rest of the world. I'd hate to live in the US, and am glad to not for just this reason. And that sentiment is enforced every time i speak to my american relatives.

It's like there is an over riding corporate over tone to everything... as if there is a greedy basterd at every turn trying to screw you out of even your most basic human dignities, if there is a buck to be made out of it. So, to some extent I see his point. I do feel like if i were to live in america i'd have to double check on everything to make sure that there isn't anything in the fine print at the ready to jump out at me, especially with things like cell phone contracts... i mean, how many of these articles to you read in a week? in a month? scary don't yah think?

avatar

DasHellMutt

.

avatar

KnightXENO

Not sure how much impact this will have long term, as the cell phone companies will just find somewhere else to rape us all... but no one should beleive the BS about early termination fees being about handset subsidies.  Its hype and propaganda that early termination fees are about handset subsidies, its about control and locking people into poor service with little recourse.

 Fact of the matter is that early contract termination fees were around before cell providers even started to seriously subsidize on handsets.  Cell providers can provide handsets cheaply because they buy in extreme bulk... and what they claim to subsidize is a farcry from the actual price of the phone.  In all advertisements and arguements cell providers use the retail price for a single phone from a reseller.  The only fair price to actually use for argument purposes would be the price the cellphone company actually pays per handset, which is usually half (and sometimes 1/4th) of the "retail price" that few indeed actually pay anymore.  Despite this they usually charge you the "full retail price" of the high end model handsets with early termination.... even if you got a base level handset, that wasn't even fully subsidized by said provider.

On top of that, your NOT actually paying for the handset with a termination fee, but with your monthly fee (and reguardless of what your phone actually is).  Big cell providers come up with a total company cost for all handset makes/models, and then add that (and a bit more) to cell service fees across the board.  Again this is reguardless of what make/model you have.  Had a free upgrade a year ago and didn't cash it in, or got a really cheap phone that [usually last years model and not actively subsidized its just that cheap]?  Too bad, your still paying the extra $5-10 per month reguardless if your getting any product/value for it.

The sole reason in today's market for early termination fees is fear/intimidation.  Many cell providers have terrible service in some areas, but with these cancellation fees they can trap a customer into keeping a service they would never willingly pay for.  Any money from termination fees usually goes straight to profit.  They would only make some sense if: you got the service last month and got the most expensive phone possible practically for free because of a high subsidy....... and you would STILL be overpaying them [and that situation is not the norm for when people end up paying cancelation fees].

In a ideal situation, a free market would take care of this (say a company without cancellation fees, or atleast honest ones)... but with all the cell phone provider mergers/take overs over the last few years... there are only a few companies around and they blantantly pricefix.  New competitors are not likely either with such high start up costs in equipement, etc.

avatar

opticallog

"Any money from termination fees usually goes straight to profit"

 

I hate to break it to you, but nothing goes straight to profit.  Profit is what is leftover after you've fully paid all of your creditors and expenses.  There is no "profit account" where businesses (or people) can hide their money to avoid creditors, debts, and expenses.

 

Furthermore, penalties have been written into contract out-clauses since the beginning of time.  When you sign a service contract, you're promising to pay for services, which you are then entitled to receive.  You can therefore expect, depend, and base your future decisions based on the fact that those services will be there.  The other party, can also expect, depend, and base their future decisions on the fact that you're going to be paying him for said service.  When a cell phone service provider is maintaining, upgrading, and investing in their own infrastructure and R+D, they are doing it with your commitment future dollars, and you receive a better product as a result.  If that provider has a less reliable cash flow stream, they will be less inclined to spend their revenue from your contract on future developments and technological improvements, meaning in the long run, you are trading away a superior growth rate technological progress and prosperity, in order to have less future obligations on your money.  Which you can already choose to do under the current system, by paying full price for a phone, and paying for service month by month, instead of a 2 year contract. 

You and the Nanny Senator can go pound sand; neither of you have the right to tell me what types of mutually agreeable, completely uncoerced contracts I can or cannot enter into.

avatar

LVmonkey

It may be open but who's looking? Americans pay possibly the most in a developed nation for telecomunications yet have some of the worst service for your dollar. the telco's have been given hand outs already and no change has come of it. Enjoy your 'free' market, i doubt you'll see much competition in "essential" services.

avatar

opticallog

Thank you Nanny Klobuchar.  Nevermind that cell phone providers are imminently more qualified to know what early terminations cost them, what revenue is lost, and what price points provide equal incentive for both the provider to provide good enough service to be retained, as well as for clients to stay.  Because you know...they are actually a cell phone service provider and you're not.  All this will do is increase the initial cost of new phones, as providers will no longer be able to provide the same level of discounts on new handsets, in exchange for more long term reoccurring revenue.

 

Politicians like Nanny Klobuchar (and anyone who signs on to this bill) need to be removed from office immediately.  She doesn't know what's best for me, in whether or not I should pay full price for a handset, or a discounted price, depending on what type of contract I freely choose to sign and agree to on mutually agreeable terms.  Get the hell out of my life.

avatar

dmonkyking

I agree with you.  Although it sucks paying cancellation fees, no one twists our arm to sign a 2 year contract so that we can get the latest and greatest cell phone for a quarter of the retail price.  Honestly, I think if you cancel early you should have to pay the retail difference of the cell phone if you want to be fair.  Cell phone companies are in the business of making money and they need to make up the costs somehow.  So I think congress needs to stay out of the business of, well, businesses and allow people to be adults and take responsability for the decisions they make.  I know congress likes to prey on peoples' victim mentaility and blame businesses for everyone elses bad decisions, but it's not their place to decide these things. 

avatar

bergerikc

Great points.  There are competetors to Sprint and Verison who offer monthly contracts.  (cricket for example) I would choose one of them if I wanted to get out of contracts, but I don't because I perfer the less expensive price of a handset.  I'm willing to lock myself into a long term deal to save money.  All this bill will do is increase long term costs of users like me.  I don't need the government to protect me, I do a fine job negociating deals on cell phones myself thank you!

avatar

DasHellMutt

Ya i just love when corporate shills post stuff like this. You, sir,
are wrong! I am currently stuck with sprint for the very reason that I
refuse to pay their early termination fees. I souldn't have even been
required to have a contract as I bought my phone outright with no
service. Sprint didn't subsidize jack! Yes they are in the business but
that doesn't make them honest in the slightest. They can make up any
sob story they want about how they'll loose money but you know damn
well they'll still turn a profit one way or another. Its just another
example of how capitalism allowed to run unchecked becomes abusive a
greedy making regulation necesary for the good of the people.

avatar

opticallog

So you voluntarily entered into a contract with another party, completely uncoerced and of your own volition, and now despite the presence of an out clause (which you found acceptable as evidenced by the fact that you signed the contract), you're mad that you can't run around breaking contract law whenever it's to your advantage, throwing the entire economic and judicial system into anarchy.  Here's a tip:  RTFM applies to contracts as well.

avatar

DasHellMutt

I never "signed" anything which is another issue I have with this whole contract business. It all happened over the phone. You should have to physically sign a contract like this to be bound by it. I was TOLD that by getting this service I was agreeing to a two year contract. I argued that I already owned the phone and was told it didn't matter. I've done this now on at least 3 occasions. I did not "willingly" accept the contract. Its what I had to do in order to get what I needed. They WILL NOT sell you service without a contract. This is for the same reason that banks won't allow you to opt out of overdraft protection - IT GENERATES UNREGULATED, UNRESTRICTED REVENUE OUTSIDE OF THEIR NORMAL LINE OF BUSINESS.

 

Contrary to what many have been commenting you do not have a choice in having a contract or not. At least not if you want the same level of service and available options. This is regardless of how and at what price you purchase the device itself and has nothing to do with hardware subsidies. As some others here have stated if the hardware subsidy was the reasoning for the additional charge, It would make more sense to increase the monthly payment for a plan on the discounted equipment. Basically extending credit to the customer on the purchase of the hardware. If the customer dropps the service before the total for the hardware is paid, they would then owe the remaining ballance. I think this would be much for fair while protecting the company from eating the cost of the phone. If you already own the phone or pay full price uyp front they have no business forcing you into a contract, period.

avatar

neo1piv14

I'd be okay with the early cancelation charges remaining the same if there was a law that forced cellular companies to keep up their end of the bargain. I'm paying close to $100 a month to T-Mobile for my service, and I don't have anything remotely resembling decent service about half the time. In an area they claim to have full 3G coverage, I'm still defaulting back to edge for over 50% of my usage. Same thing happened to me in the middle of Dallas. They've had to replace my phone around 5 times now because instead of sending me a new one, they send me refurb units that were obviously never checked (read: 5 buttons didn't work straight out of the box). If I failed to pay as often as they failed to perform, they'd have terminated my service, so why should I still have to pay to end a contract that they can't uphold? Total BS from the day I started my service with them. T-Mobile, I beg you, teach your salesmen the difference between "This phone supports 3G" and "You'll have 3G speeds!"

avatar

routine

You are well within your rights to terminate service w/o being charged a termination fee based on what you've said.

They have violated their end of the contract, making the whole thing null and void.

My sister-in-law went through the same thing.  It's a pain in the ass, but it's possible.

avatar

neo1piv14

I was hoping I had a leg to stand on with them. They just keep insisting that if they replace my phone one more time, that'll fix the problem. It's just irritating to have to download all my apps again, make sure all my settings are the way I want them yet again, and get used to a new set of problems on someone else's old, broken phone. They argue that if I have service at all, then they're holding up their end regardless of what the sales person told me when they sold me my phone.  Really, just some level of accountability between T-Mobile and their employees would make my life easier.   As for the termination fee itself, I can understand paying a termination fee equal to one month of service or something similar. To have a $350 term fee whether you had the $10 phone with$40 per month service or a $250 phone with $100 service is just a little out there.

avatar

silentrob187

Senator Please, Unemployment is 10% don't you have something better to do with your time?  Any idiot with any degree of economics eductation knows that the reason people can get their "free" phone upgrades or $99 Palm Pres is because of the 2 year service contract!!!  Wihtout the contract the phone companies could not cover their costs.  there would be no upgrade policies and state-of-the-art cell phones would dwindle.  It is this model that pushes the technology further. 

 This bill is idiotic and show how liberal economics/buisness works...IT DOESN'T.

How about taking on a REAL issue like making cell phone makers/carriers invest in long-term studies on the risks of brain cancer using their devices.  That is what a REAL watchdog of the people for the people would do...not this crap!

avatar

Caboose

 So you're saying that you have no problem being raped up the ass by your mobile carrior should you have to cancel your contract early for any number of reasons. Moving to a location where the service is limited, leaving the country to go on a tour of duty for a year or more, major issues with the carrier, among other reasons.

And haven't there already been enough studies to say that mobile phones cause cancer, and men to become impotent, and they don't cause cancer, or men to become impotent. Or it might do both. Maybe not. But it could do both... But no, it doesn't. (Sound like almost all of the studies to date? I think so).

 

-= I don't want to be dead, I want to be alive! Or... a cowboy! =-

avatar

POMF2K

"So you're saying that you have no problem being raped up the ass by
your mobile carrior should you have to cancel your contract early for
any number of reasons. Moving to a location where the service is
limited, leaving the country to go on a tour of duty for a year or
more, major issues with the carrier, among other reasons."

 This shit has got to stop.  You aren't being raped up the ass.  You are paying for something you received for very little cost upfront.  The carrier is collecting from you, what they could have been expected to to have collected had you fullfilled the terms of your contract.

I'm not saying the prices are fair. . . but it is still A CONTRACT.  A contract which you signed and are legally obligated to fullfill.  There's no gray area here.  I don't understand the issue.  How can people whine about this sort of thing?

Furthermore, should you have to leave the country for a tour of duty. . . they'll suspend your account/service.  As in you owe nothing during that time.  And you want to know something nice?  Verizon will even count that time overseas (while they are receiving no money) just to please their loyal customers in the military so that when they return they can get a new shiny phone at lower rate. How very thoughtful.

As far as moving to an area where service is limited. . . why would you want a carrier whose service is limited anywhere?  Do your research and find the carrier with the best coverage before you sign on.  

People really believe that crap about the customer always being right.

avatar

fullur

A 30 year study just concluded that cell phones do not cause cancer. (have there really been cell phones that long?)

More importantly, (because, did anybody ever actually believe that about cell phones?) most companies have a caviat in the contract in case you move to an area they do not have coverage or something else truly unforseeable comes up (I know specifically that AT&T has a military contract suspension). Additionally, if you signed up with a company that was not reasonable about that if it matters to you, a) you're an idiot and b) you still probably saved money versus buying the phone outright.

You choose to have a cell phone contract. That means you choose to deal with the consequences.

avatar

routine

Thank you. The only reasonable and thoughtful response.

avatar

jihnn

do you really think  those phones cost anywhere near what the early disconnect charge is.... well i have a bridge to sell ya

 

you get a $400 phone and all you have to do is agree to a 2 year contract....hmmm phone cost maybe $50 to $75

 

and you tell your friends what a great thing you have... you have been taken in by some of the best marketing ever

 

 i will take the lower cost to change to a better carrier any day.        can't wait for the change

avatar

Velcrow

I'm a bit confused. Isn't this a violation of contract law? An individual KNOWINGLY and WILLINGLY enters a contract with another entity (say, Verizon), but wants the government to swoop in and save them from the big, bad company? Another example of what's wrong with this country - no responsibility. Don't give me that "it's more than the cost of the phone" garbage. That has ZERO relevance to a contract signed under free will. Make the decision and deal with the consequences.

When I first started reading the article, I thought "well the only way they could swing this is calling it anti-competitive". And low and behold, that's their approach. Politicians, like watching a circus.

avatar

roleki

Yeah, we should just wait around for an entire industry to eliminate their usurious contract conditions that exist only to lock people into shitty service.  Oh wait, out of the kindness of their just and wise hearts, Verizon doubled their fees.  How about some corporate responsibility for once?  Never hear that come out of the government bashers mouths.

avatar

opticallog

That's not usury in the slightest.  You signed a contract with another party based on mutually agreeable terms.  You weren't under coercion, nobody forces you to have a cell phone, and nobody put a gun to your head to force you to sign it.  On the other side, The Nanny Senator is putting a gun to service provider's head's telling them what they can and cannot offer potential customers in terms of terms and incentives for entering into a contract.

 

Please explain what right you or the Senator have to tell me what agreements I can enter into, that both I and another party see as mutually beneficial?

avatar

LVmonkey

Why would you live in a governed country if you do not want a body of people to govern you? Probably the same reason the people are complainning about the cell phone service packages... there isn't really and choice... not really.

Either you get screwed by company A or B or C... you can't really opt for the 'i don't want to be screwed but i'd like to have a cell phone service'... THAT is the issue being discussed. Your just another economic slave with a choice set of economic masters. Entire Artists contribution of works revolve around that point. Hell, i think most of NIN body of work revolves around that idea... so did Andy Worhols (well, kinda).

Your not a whiner because your tired of the whip. 

avatar

fullur

It is not a requirement of life that you have a cell phone. People still function just fine without them.

 

If you can't deal with the commitment of a contract but you have decided you "must" have a cell phone, don't get a phone subsidy. There is not a single company that will not allow you to go month-to-month if you bring your own phone to the table.

 

Stop complaining and controlling through government fiat. Vote with your wallet.

avatar

travispaul138

I'd rather get screwed by company A,B, or C (who I could sue) than get screwed by the government who generally decides they can't be sued.

avatar

I Jedi

Hell, if it helps me terminate my contract with Sprint, so that I can get a new Android device later this year then I fully support!

avatar

big_montana

You do know that Sprint does carry several Android models? Or are you using this as an excuse to terminate your contract early with Sprint? If so, you do know there is a class action lawsuit against Sprint over early termination fees, but if you did, you would have signed on for it, but you missed the boat on it as the date has passed to have yourself added to the suit.

avatar

aziobron

"...who mightn ot otherwise..."

 "who might not otherwise"

avatar

Peanut Fox

While Jeffery is right that you can buy a phone with no strings attached, it has no affect on the monthy bill.  You would think that someone who buys a phone at a subsidized price would have a larger monthly bill, or the reverse in where someone who just buys a phone at retail price would have a much smaller bill.  Clearly this is not the case, and people who aren't on a companies contract don't see any sort of benifit.  

I have to wonder if wireless provider X can give me $450 dollars off the cost of a handset what they are really paying for it?

avatar

opticallog

It's not about a decreased monthly bill, it's about a more stable revenue stream.  Businesses of all sorts trade slightly higher upfront revenue for reliable stream of revenue, even if the total is slightly less.

Log in to MaximumPC directly or log in using Facebook

Forgot your username or password?
Click here for help.

Login with Facebook
Log in using Facebook to share comments and articles easily with your Facebook feed.