Legislation Would Limit Early Termination Fees

Posted on December 3, 2009

I don’t normally follow politics, but my own Senator from the state of Minnesota, Amy Klobuchar and other senate colleagues introduced a bill today that would limit the amount of cell phone service provider could charge in early termination fees.

The timing is perfect since Verizon recently announced that their customers who were smartphone users would have to pay in upwards of $300 if they prematurely ended their relationship with the provider.  How ridiculous!

Several years ago, I did pay Verizon $175 to end our relationship. 

“Changing your wireless provider shouldn’t break the bank,” said Klobuchar. “Forcing consumers to pay outrageous fees bearing little to no relation to the cost of their handset devices is anti-consumer and anti-competitive.”

I have to agree.  Instead of spending the money on litigation with AT&T, both carriers should put that money towards getting their networks in better shape, especially AT&T.  The iPhone has been a goldmine for AT&T, but their network has subsequently suffered and become unbearable to use.  Between dropped calls and general coverage issues, I can barely stand to keep their service at this point.  Most customers can’t afford to switch carriers – and I’m not talking about those who bought an iPhone.

According to Senator Klobuchar’s website, the bill would:

– Prevent wireless carriers from charging an ETF that is higher than the discount on the cell phone that the wireless company offers consumers for entering into a multi-year contract.  For example, if a wireless consumer enters into a 2-year contract and receives a $150 discount with the contract, the ETF cannot exceed $150.

– Require wireless carriers to pro-rate their ETFs for consumers who leave their contracts early so that the ETF for a two-year contract would be reduced by half after one year and pro-rated down to zero by the end of a contract term.

– Require wireless carriers to provide “clear and conspicuous disclosure” of the ETF at the time of purchase.

– Require monthly billing statements to clearly state the pro-rated fee customers would be charged if they terminate their contracts before the end of the next billing cycle.

I think most customers are pretty loyal to their carriers.  Most customers see an average bill between $90-$200/month.  Your customers are paying plenty to stay connected – if you as a carrier can’t get the job done, then the customer should have the right to go somewhere that can.

If you’re interested in more about the bill, check out Senator Klobuchar’s press release.

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