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Friday, 01 August 2008 07:17

Sprint early termination fees illegal

Written by David Stellmack

Image

Court rules against Sprint, orders refunds

The Judge in a case filed against Sprint Nextel has ruled that the early termination fees charged by the company against its customers are excessive. The Judge ruled that Sprint Nextel should pay back $18.2 million in these types of collected fees to consumers, making this a decision that could influence decisions in similar wireless carriers’ cases across the U.S.

The Judge also ruled that the service contracts weren’t legal and that in addition to refunding the termination fees that Sprint Nextel must stop its efforts to collect another $54.7 million in uncollected termination fees from its customers.

Verizon Wireless has already been sued in California and settled the claim by agreeing to pay $21 million to customers.

Early termination fees of customer contracts have been used by carriers as a means to retain customers and to guarantee revenue, since the sales of cell phones are not a big profit margin. Wireless carriers have imposed stiff fees that border on punitive, as they can be as much as high as $200 per line for customers who terminate their service contracts before their expiration date.

Consumer groups argue that the early termination fees penalize customers and discourage carrier competition by limiting consumers’ ability to shop for competitive rates before their services contracts expire.

The FCC is currently considering a proposal that allow it to regulate these types of fees. It is not clear what impact the FCC’s authority would have on pending litigation.

Last modified on Friday, 01 August 2008 07:38

David Stellmack

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