Judge Rules That Early Termination Fees Are ILLEGAL In California
According to the lawsuit, this ruling will affect about 2 million Californians, and may affect other, similar lawsuits that are pending in other states, says the San Jose Mercury News.
"We are disappointed," Sprint Nextel spokesman Matthew Sullivan told the paper.
Consumer's Union (you know them as the publisher of Consumer Reports) were pleased with the ruling.
�This is a huge victory for consumers,� Chris Murray, senior legal counsel for Consumers Union said in a press release, but expressed concern that the FCC might step in and start regulating the fees.
�Not only did this case generate an extensive record showing that these fees are not really used to subsidize wireless phones, but are instead simply used to lock consumers into contracts. Contract law says that's illegal. Let's hope the FCC doesn't turn around and give the wireless industry a get out of court free card.�
We're looking forward to seeing how this affects our readers in California, so if you're battling Sprint over an ETF and you live in CA
A California County Superior Court judge has just ruled that early termination fees from cellphone companies violates California state law and are illegal. What's this mean to you? Sprint Nextel has been ordered to pay $18.2 million in reimbursements to customers who already paid their ETF, and to stop trying to collect $54.7 million from customers who canceled and refused to pay. But if ETF fees are illegal, does that mean 2-year contracts—which in turn give you subsidized price on your cellphones—will be a thing of the past? Tough to say, but we're headed towards some change
ReplyDeleteCalifornia judge declares Sprint's early termination fees illegal
ReplyDeleteJoel Johnson at 8:56 AM Friday, Aug 1, 2008
A California judge has passed a preliminary ruling on Sprint Nextel's early termination fees: I don't speak Legalese, but I believe an onomatopoeic kablammo is accepted in most languages. The judge presupposed that the ETFs were unfairly enforcing contracts. Of course, the FCC has complained about the ruling, suggesting instead that it should be a federal issue:
"A consistent, uniform, national framework of standards is the best-case scenario for consumers and for the industry to serve consumers," he said. "If you allow 50 states to regulate and legislate in 50 different ways, you can create a very confusing and obviously inefficient service."
At a public hearing last month, FCC Chairman Kevin Martin sketched out a plan in which cancellation fees would be reduced over the life of the cell phone contract. Three companies - T-Mobile, AT&T and Verizon Wireless - already do that, and Sprint said it would begin prorating its fees next year.
The commission also is trying to resolve whether states have any role in regulating early termination fees, which are among the biggest source of complaints among wireless consumers, said spokesman Robert Kenny.
Early termination fees are often explained away as the penalty for getting a subsidized handset from your wireless carrier. Most carriers had planned on implementing prorated ETFs that would get smaller as you approached the end of your contract.
TERMINATION FEES RULED ILLEGAL (A CALIFORNIA JUDGE SAYS CELL PHONE COMPANIES CANNOT CHARGE TO END CONTRACTS EARLY)
ReplyDeleteLINK TO IMAGE!!
July 31, 2008. HOLY S.H.I.T
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.