T-Mobile Proposes Settlement for Early Termination Fee Lawsuit

T-Mobile, the nation’s fourth-largest cellular carrier, is looking to put an end to a class-action lawsuit regarding its early-termination fees by proposing a $13.5 million settlement.

The lawsuit alleges that T-Mobile broke federal and local laws by imposing a fee for users who terminate their contracts early. The suit was originally filed in August 2008, and it covered subscribers affected between July 1999 and February 2009.

The argument over early termination fees has become more heated over the years as some  customers feel that they are unfair and should not be imposed.

“If a cellular company decides to not provide me with service, everything is alright and I cannot make them compensate me," said Cristin Jones, a paralegal and former T-Mobile customer. "So, why should I have to pay for no longer wanting the service of the company? It doesn’t make any sense – especially when the company will charge me and terminate my contract if I decide to not pay my bill.”

The current recession has been one of the causes of customers becoming increasingly frustrated by early termination fees.

“Because of the recession, everyone is making budget cuts so extra cell phones are being cut," Jones said. "I don’t understand why I should pay $200 to cut my plan when I’m having trouble paying $50 a month for my bill."

Although there is dissatisfaction with early termination fees, companies argue that such fees are necessary.

“Early termination fees are necessary for subsidizing cell phones and smartphones,” said Carolyn Jackson, a radio, television and film major and former T-Mobile employee.

If the proposed settlement is approved by the courts, customers who paid the $200 cancellation fee and filed an early termination fee (ETF) claim form will be compensated up to $125. Customers who were charged a cancellation fee but did not pay it or received a credit within 30 days are eligible for up to $25. T-Mobile estimates this will cost up to $11.5 million.

"Non-cash" relief will be provided for customers who had an ETF in their contract. Such relief could include 50 bonus minutes a month for three months, 100 bonus text messages a month for three months, "T-Mobile HotSpot" access for three days, or the right to have a contract with T-Mobile containing a pro-rated ETF. The total value of these assets is expected to total $2 million.

With the millions of dollars the lawsuit will cost T-Mobile, people are wondering how such a settlement will hurt the company.

“I don’t think the lawsuit will hurt T-Mobile because it is one of the major cell phones companies," said Connie Young, a medical biller. "Cell phone companies are one of the few industries that aren’t as hurt by the recession as people would assume. “They are such a necessity and people continue to buy the latest smart phones.”

T-Mobile is just the latest cell phone company to face a lawsuit over its early-termination fees. Sprint, Nextel, AT&T, and Verizon Wireless have all been previously sued for their contract cancellation fees.

Within the past year, T-Mobile has made efforts to become more flexible with their customers in regards to service plans. According to a T-Mobile press release, the company now pro-rates or reduces the cost over time of its early termination fees for contract customers. This means that customers will pay less to terminate their subscription as the end of their contract nears. The company also offers a variety of pre-paid plans for customers who do not want ETFs.

Though it may be safe to assume that the lawsuit will hurt T-Mobile’s reputation, many feel the lawsuit will help T-Mobile’s business in the future.

“I think the lawsuit is a good thing for the company because it will make them become more flexible towards their customers," Young said. "That will help their business become more successful in the long run."
 

7 comments

Michelle

Thu Nov 19 2009 09:19

I hate Tmoble!!! My husband and I switched from Tmobile to Verizon because he had a Blackberry Pearl and the trackball kept coming out. Everytime I brough this to Tmobiles attention they just wanted us to to "buy" a new phone. Finally one of their reps told me that if I didn't like the fact that I had to buy a new phone I could cancel. So I did!!! Now they want to charge me $400 in EFT and now their story is that we had a warranty on our phone and would not have had to buy one....well maybe they should train their employees properly to not give ultimatums. I have spent countless hours on the phone fighting this, we have perfect credit and don't want it tarnished! I filed a complaint with the FCC this morning, but I want to pursue this further. Any thought?

shakim

Thu Nov 5 2009 06:12

i am pissed at T-mobile also! i had my service for two and a half months and i am already on my seventh phone.they were suppose to send me a brand phone two times i received everything but the battery covers.they truly suck but because the criteria is strict with certain cellphone companies i am struck!

Toneykc

Thu Oct 8 2009 13:59

I entered an "agreement" to receive home and cell service. I had to call T-Mobile on three occassions because of problems with their modem, and spend an average of 1-2 hours on the phone to remedy the problem, I "upgraded" to a family plan to save money (cell phones). I chose to stick with the "free" phones that they give you when you start the service. I had an accident in which one of the cell phones was damaged. I went to the t-Mobile store and asked if I could get a replacement phone for free instead of my yearly upgrade. They said that because I "upgraded" it changed my contract and I wouldn't be eligible for another phone for eight more months. They would, however give me a "slight" discount on an upgraded phone.Aghhhhh! This was the final straw. I called T-Mobile to cancel my account and was told that they would be "happy" to assist me, however I would be charged a termination fee of $200.00 per line to do so!!! That's $600.00!!! Then they "offered" to give me a replacement phone, but that would extend my contract for another two years. Talk about being held hostage!!!!!!!!! I would NEVER recommend T-Mobile to anyone (well, maybe my ex-wife).

Betty C

Sun Oct 4 2009 15:14

We have been with t-mobile for 8 years now and were always happy with the service til the past 6-12 months. We have repeatedly been given wrong information and their customer service just isn't what it use to be. I am looking into cancelling service altogether and they really don't seem to care. It's a shame a company can turn sour so quickly and show that they don't really care about customer satisfaction any longer. I am determined and still fighting to get what I feel is fair and hope everyone else does!!

Jennifer

Sun Sep 20 2009 08:25

i'm very dissatisfied with T-mobile. been with them for 3 years contract ready to expire in oct. 2009. called them and they told me i'd have to pay 200.00 etf for each phone. My service stinks with them have complained for almost 1 year got a 20.00 credit on one bill. Neither myself or my husband get any service at our place of employment even tho were on the map with service. Very unhappy customer. Want out now

Sara

Fri Jun 26 2009 18:19

I think early termination fees are ridiculous. I'm with t-mobile, and my 3rd phone through them ( three sidekicks, since March 2007) is on its last leg. They keep sending me refurbished models and charging $115 even though I have insurance, and I'm tired of their rude customer service. They told me it'd be $200 to terminate/for me to switch to at&t, and I think it's complete crap. I use my phone for personal use as well as for my business (I'm a freelance photographer) and when I miss phone calls or e-mails because of their shotty service, I tend to get just a little upset. Bah!

Bill C

Sun Jun 21 2009 13:45

Job required switching personal to iPhone (AT&T). My wife and I currently on T-Mobile family plan, set to expire Dec 23rd, 2009. Spoke to T-Mobile on 6/20/09 asked if wife stayed with carrier how much ETF... they said if I switched today (6/20) would be $200 or $100 after 6/23. No consideration for wife staying with T-Mobile. I'll go back to Apple on the 23rd and switch our services to individual plans with AT&T thus ending a miserable time with T-Mobile... and she get's an iPhone.

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