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Cell Phone Cancellation Fees For Laid Off Workers Under Fire

Consumer interest groups today called on major cell phone carriers to waive cancellation penalties for subscribers who have lost their jobs. The fines, called early termination fees, are among the most contentious consumer issues for cell phone customers and are being fought in multi-million dollar court battles by consumers who feel unfairly trapped by the fine print of subscriptions that can cost hundreds of dollars.

In letters to Verizon Wireless, AT&T, and Sprint Nextel, public interest groups including the National Consumers League and Maryland Consumer Rights Coalition said laid off workers were searching for ways to cut expenses but faced the hurdle of penalties for canceling expensive cell phone contracts.

"Unfortunately they are often locked in to expensive services that they can't afford to keep, but also can't afford to cancel due to hefty early termination fees," said Sally Greenberg, National Consumers League Executive Director.

The wireless industry said instead of a blanket policy to forgive the fines for unemployed subscribers, consumers should reach out to their carriers if they are having problems with their subscription. The carrier may find a way for the subscriber to alter their payment plan, for example.

"We already have hardship policies for individual consumers in place," said Dane Snowden, vice president of external and state affairs for wireless industry trade group CTIA.

Early termination fees were hotly debated last year at the Federal Communications Commission. Carriers argued that they imposed penalties to make up for the costs of phones they subsidized so that subscribers could buy phones at lower prices. They said that when a consumer ends a contract early, the costs of the phones they subsidized couldn't be recouped.

Subscribers, however, said the penalties were onerous and didn't account for things like when a subscriber moves to a region where their carrier doesn't have coverage or is unhappy with their service. Some subscribers said they were unaware of the penalties when they signed up for their contracts.

The FCC, under former chairman Kevin J. Martin, did not act on the ETF debate before his departure earlier this year. Major carriers have all agreed to shift their ETF policies to a pro-rating system that charges penalties based on how long the subscriber held service with the carrier.

By Cecilia Kang  |  April 21, 2009; 5:59 PM ET  | Category:  Cecilia Kang
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