Commitment is difficult. Making a choice and sticking to it is too much to ask of some of us. And these days, thanks to law suits, consumer pressure, and the internet, breaking your commitment to your cell phone company is now getting easier.
When beginning a mobile phone plan most customers elect to sign a one or two year agreement with a service provider, usually either AT&T, Sprint-Nextel, or Verizon. If you sign a contract guaranteeing steady payments you typically receive a free phone. Buried in that contract, though, is an agreement for customers to pay between $100 and $200 if the contract is broken early.
In the jargon of cell phone contracts, these charges are “early termination fees.” The service providers claim that the charges are in place to guarantee they recoup the cost of giving out free handsets. Chicago attorney Jay Edelson, whose firm Kamber Edelson has filed over 60 class action suits against service providers, says differently. Edelson says these fees are illegal.
“A lot of people think that if you put something in a contract then it’s legal,” he told me in an interview recently. “That’s not true.”
On July 28 of this year a Superior Court Judge in California agreed with that argument, ordering Sprint Nextel to pay its subscribers in California over $18.2 million because it had been binding consumers to early termination fees. However, no payment has yet happened and the legality of the fees remains uncertain, as the judgment is being appealed.
In the meantime consumers have been taking matters into their own hands, and some are using the internet to describe successes so that others can attempt to follow suit.
Ely Rosenstock is a student at Baruch Business School in New York City who recently wanted to switch service providers from Verizon to AT&T in order to get the new 3G iPhone. Rosenstock still had nearly a year and a half left on his Verizon contract, and was told by the company that he’d have to pay an early termination fee of almost $200.
Where most of us would have quit, Rosenstock instead decided to study his contract and his bill. He’d heard from a friend that if Verizon decided to raise service rates during the term of the contract he might be allowed out without a fee. Sure enough, his contract told him that Verizon had the right to change any of his rates at any time, but if those changes had a “material effect” on Rosenstock he could terminate his contract within 60 days with no early termination fee.
In fact, laws require service providers to allow customers out of contracts within a certain period of time, usually defined by the contract, with no fee if the provider decides to raise rates.
But Rosenstock discovered that Verizon (surprise, surprise) was reluctant to simply let him walk away without shelling out the fee money. He was first told that the rate change he cited was simply a tax that had been passed on from the government. He argued that even if the government raised taxes on Verizon, the company didn’t have to pass the charge on to consumers. Next customer service agents told him that the change wasn’t “material” and offered him a credit each month to cover the difference. He told them that he didn’t want the credit, and that the company couldn’t tell him what rate hike (in his case, under a dollar a month) had a material effect on his finances.
It took him four phone calls over the course of a week, but Verizon eventually agreed with Rosenstock. He posted a video on Youtube and at his blog crastinate.com documenting the step-by-step process he’d gone through to escape his contract without a fee. The video was picked up by consumer protection websites consumerist.com and slickdeal.net, and he became a mini-celebrity in the blog-o-sphere. His video was even excerpted in Women’s Wear Daily magazine.
Rosenstock says that the connectivity offered by the web has made consumers less afraid to challenge corporate policies they deem unfair, and that in an online world companies and customers can work together to solve problems.
“The web has turned from a place where people complain, to a place where people look for solutions,” he told me.
Even unarmed with clauses from your contract, persistence can pay off. Recently AT&T customer Sarah Maslin, a grad student at Columbia University, wanted to cancel a two year agreement that was only four months old. She’d mistakenly signed up for a Aircard networking plan that she didn’t really need, and promptly lost the hardware the company gave her when she signed up.
Maslin decided to phone AT&T and plead her case. The first agent she spoke to refused to budge, but she was eventually transferred to a friendlier agent. He agreed to credit the four months of payments she’d already made on the useless Aircard towards her early termination fee, allowing her to cancel the contract at no cost.
It may be that service providers have begun to sense a change in sentiment from judges and consumers. Whatever the reason: closely reading your contract, simple persistence, or finding a friendly rep on the phone, it is now less certain that you’ll face an early termination fee when you begin to doubt your commitment to your service provider.
And with the legal validity of early termination fees in doubt, Attorney Edelson says the real problem with fees like this is they give already powerful phone companies more control over customers.
“They tell customers ‘we’ll take $10 here, and $10 there, and if you try to quit early on us we’ll hit you with this huge fee,’”
