Termination fees ruled illegal

Check this one out. I hate this termination fee thing. Just two days ago Melissa was saying that her sister Jenna’s boyfriend Lou had to pay 200 dollars to get out of a phone contract. Its a bunch of crap.

from yahoo.com:

California judge rules early cell phone termination fees illegal
Thu Jul 31, 2008 12:48PM EDT

In one of the most significant legal rulings in the tech industry this year, a Superior Court judge in California has ruled that the practice of charging consumers a fee for ending their cell phone contract early is illegal and violates state law.

The preliminary, tentative judgment orders Sprint Nextel to pay customers $18.2 million in reimbursements and, more importantly, orders Sprint to stop trying to collect another $54.7 million from California customers (some 2 million customers total) who have canceled their contracts but refused or failed to pay the termination fee.

While an appeal is inevitable, the ruling could have massive fallout throughout the industry. Without the threat of levying early termination fees, the cellular carriers lose the power that’s enabled them to lock customers into contracts for multiple years at a time. And while those contracts can be heinously long, they also let the carriers offer cell phone hardware at reduced (subsidized) prices. AT&T’s two-year contract is the only reason the iPhone 3G costs $199. If subsidies vanish, what happens to hardware lock-in? Could an era of expensive, but unlocked, hardware be just around the corner? It’s highly probable.

Of course, the carriers aren’t going to take this lying down. Early termination fees are seen as critical to business, so carriers are expected to look for ways to reclassify the fees (such as by calling them “rates,” part of the arcane set of laws that covers the telecommunications industry). The industry is also pushing for the federal government to step in and claim oversight over the early termination fee issue, which would invalidate any state ruling. The FCC is generally more tolerant of such fees, though Chairman Kevin Martin has proposed a plan whereby the fees are decreased the closer you are to the end of your contract.

The FCC may also buy the argument that, since carriers are nationally based (and consumers can use their phones anywhere in the country), that a single policy should apply across the nation, rather than creating a patchwork of legislation that could lead to confusion and chaos caused by having 50 different policies.

Is the early termination fee dead? Not yet, but it’s looking a little haggard.

I hope that this causes a lot of change, not only to cell phones but to cable cancelation fees and whatever else charges you for cancelling their service. I understand that it was a way to deter people from cancelling but at the same time its wrong. If people don’t want your service they shouldn’t have to pay for it. I think this is a turn in the right direction.

–Cos

5 thoughts on “Termination fees ruled illegal

  1. Seriously! Not everyone can pay for something for two years, consistently, though it can be argued that you’d want to be sure of that before signing up for the contract.

    Circumstances change, and a contract like this is unfair to customers.

  2. Hell yeah! If you don’t have enough money that you’re canceling your cable, then you sure as hell don’t have enough money to pay a cable cancellation fee.

    Or, maybe you just don’t want cable, which is cool, too. That’s like them punching you in the face when you say goodbye.

  3. I mean, I understand, this helps to make sure people just don’t leave and come back and stuff, but its really putting you in a corner and it isn’t right at all. I hope that more things like this start to take shape.

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