California judge rules early cell phone termination fees illegal

[Vteckidd]

YAY

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.

[Kevykev]

Wow, this is some news. Wonder why this is just being done - guess everything has it's time, some fall later than others.

Who.what is this source of this info.?

[XLR8NMR2]

damn now only if this could pass in GA.......T-mobile ****ed my acct up and there trying to get 1200 worth of early termination fees......****ers

[TIGERJC]

Money talks and I bet this will be overruled

[Brett]

That can be both good and bad, because with out that phones we want will be at FULL price not the $199 or so we are used to

[Nissan Sean]

not gonna happen. ETF's are WAY too important to cell phone providers. there gonna appeal with the quikness.

[Julio]

this wont last. And if it does stay.. It would suck balls... prices will go up..

[BanginJimmy]

This is actually a bad thing for consumers. With a high end phone like the 3g you could sign the contract when you buy the phone then cancel it the next day and still come out ahead when compared to retail.


If this were to pass nationwide then the cost of every phone would triple or more. Monthly plans would be more expensive, as would all of the add on's like Nav.

In the end there is still contract law and if its in the contract it is binding. The article doesnt give any info on the state law to go and look at that.


For those of you that say it may reach Ga, you are wrong. This isnt a violation of any current GA laws so it would have o effect on us here.