FCC may limit early-termination fees

If you hate paying a fee to end your cell phone contract yearly (and really, who doesn't?), you'll be interested to know that the Federal Communications Commission may just have your back. The Associated Press is reporting today that the FCC is considering proposals to regulate, but not eliminate, the early-termination fees (ETFs) that have become a sore spot for cell phone owners. Currently, wireless carriers charge up to $200 for customers who leave service contracts before their end date.

The FCC is not commenting on the proposal, but according to the AP, the agency is negotiating with carriers on a number of terms. Most importantly, ETFs would be capped at an undisclosed amount and carriers would be required to prorate fees according to how long a customer has stayed with the contract. While most major carriers prorate ETFs already (the longer a customer has been in a contract, the lower the ETF) they are not required to do so. Legislation proposed in the Senate last year also calls for prorating ETFs, but so far the Cell Phone Consumer Empowerment Act of 2007 is not close to passing.

The FCC proposal also would prohibit carriers from charging an ETF to customers who change terms of a contract or end one contract and start another. New customers would be able to end a contract without paying an ETF in the first 30 days of their contract or for up to 10 days after they receive their first bill.

As expected, the government would give carriers some concessions in return for the regulations. The AP says the proposal would prohibit states from regulating ETFs and that carriers could not be held liable in a number of ETF-related class action lawsuits that customers have filed in several states.

Carriers have long held that ETFs are necessary because they sell phones at a loss to their customers. In their view, the fees are a way to recoup the costs for offering free or heavily discounted new phones. The Cellular Telecommunications Industry Association, which counts a lot of carriers in its membership, supports ETFs for the same reason; it contends that ETFs benefit consumers because they allow carriers to offer phones and plans at a lower monthly price.

[alenas]

So why do we have to pay ETF if we buy iPhone? Cause iPhone is not being sold at loss...AT&T is just greedy *****

[gparshal]

To stop ETFs the solution is simple and no carrier would resist. Simply require public reporting of ETFs. Carriers would then be embarrassed into disclosing how many customers were "voting with their feet" by leaving them and gradually would reduce or eventually eliminate them.

And any proposal to pro-rate ETFs should require proration based on total time with the carrier. In my case, Nextel last August sold me a "data" plan that doesn't even work with my Blackberry, and is now saying I'm in a plan until August, 2009, even though I've been with Nextel since 2003.

[unionizer]

FTC doesn't have our backs. The proposal is the cell phone industry's proposal. The FTC will stick it in our backs. Cell phone companies will keep all the ETFs they collected in the past and those of us who refused to pay them will still have that black mark on our credit reports. That you quit early because the service stunk and the service personnel were idiots is irrelevant. After all, you signed the contract that had the full page of fine print on the back, that expressly referenced some website where you could review 10 more pages of fine print, which were amended and modified. Or the terms were in the bottom of the cell phone box you got. Yeah, freedom of contract works only one way. Don't let the cell phone companies and the FTC "regulate" the ETFs by making them legal. It's like catching a bank robber and letting him keep all the money he stole in the past and letting him only keep some of the money he steals in the future so long as he returns the rest. Makes no sense!

[stocklirider]

How about government jumping in and doing something like this on gas prices??