The Checkout

Hidden Charges? Nothing Some Earbuds Can't Fix

A few weeks ago I found out I was eligible to benefit from a recently settled class action lawsuit. The suit alleged the cellphone service provider used deceptive advertising and got away with collecting hidden charges.

I received two vouchers. I can sign up for only one choice on each voucher.

Let's take a look at the goodies being offered, shall we?

Voucher No. 1:

* A $15 credit in return for renewing my contract for a year.
* A $30 credit in return for renewing my contract for two years.
* Continuing $3 service credits every three months beginning the seventh month after redemption of this voucher up to and including the 28th month, or until I enter a new contract, whichever comes first. (Say that ten times fast.)
* A 25 percent discount on a wireless telephone accessory, not including wireless telephone handsets or devices, up to a maximum discount of $15.
* 250 free domestic text messages each month for six months; a 25 percent discount on a wireless telephone accessory, or a continuing service credit of $3 every 3 months for 21 months. Unused text messages will not carry over into the next billing cycle. (Of course.)
* a 120-minute long distance calling card usable over 6 months.

Voucher No. 2:

* Another voucher, this time for a hands-free ear bud with a retail value of $15. (Limit one per class action settlement participant.)
* A voucher for a $15 credit toward a hands-free accessory other than the ear bud available under the previous option.

You can receive more benefits if you're one of a smaller number of really aggrieved folks who paid more than $50 because of delayed roaming charges, or you were hit with an early termination fee even though your contract didn't mention the fact that the company could charge you one.

My first reaction to the settlement: The choices read like prizes on a bad game show. Granted, Verizon Wireless was not found guilty of any of the practices it was accused of. But having been a subscriber for several years, I find it hard to believe the company overcharged me by only $30 -- the maximum face value of most of the benefits, if I choose one from each voucher.

The fact that two of the benefits are redeemable only by locking me into an even longer contract also struck me as especially audacious because it means more business for Verizon Wireless.

As we all know, if I wanted to get out of the contract at a future date, I would have to pay an early termination fee of $175. (In June, Verizon said it would prorate ETFs from now on, but I would be eligible for that only if I sign a new contract. Do we sense a theme here?)

This particular case, the Campbell Class Action approved in May stemmed from consumer complaints that Verizon Wireless misled customers by promoting a nationwide network when it didn't have one. Where it had gaps, it either had dead zones or rented service from outside companies without revealing to customers where those were located. The suit alleged the company then charged consumers when they made calls on rented networks, sometimes as long as two months after the calls were made. The result is that consumers were hit with bills higher than the promised monthly rate that Verizon Wireless so heavily promoted.

The class consists of customers of Verizon Wireless and certain partners between Jan. 1, 1991, and Nov. 2, 2003.

More after the jump...

Consumer advocates worry that class action settlements don't always benefit consumers and end up generating more business for the defendant companies. Some groups, such as Trial Lawyers for Public Justice have even intervened in settlements to get better deals for consumers.

When asked about the settlement, Verizon Wireless spokeman John Johnson wrote via e-mail: "We are complying with a court order. The terms of the order were agreed to by a judge, consumer groups and Verizon Wireless."

According to Pam Gilbert, a consumer protection attorney with Cuneo Gilbert & LaDuca, the settlement is not as bad as it appeared at first blush to me.

The No. 1 goal of a class action lawsuit, of course, is to get the company to stop whatever it was doing. Beyond that, a settlement is a balancing act between the need to compensate the lawyers and the class members without bankrupting the company.

Gilbert reckons that a minimum benefit of $15 per customer, multiplied by the millions of potential class members, is financial disincentive enough for Verizon to address the substance of the suit's complaints. Service discounts and vouchers for ear buds is also more practical for the company to implement than sending everyone a $15 or a $30 check, which would require a big cash outlay.

I hope she's right that class actions make a difference because Verizon Wireless doesn't seem to be hurting for cash or customers. Its revenue increased during the third quarter of 2006, compared with the third quarter of 2005, by 18.2 percent, making it the largest U.S. wireless company by revenue. It also added 1.9 million customers during the third quarter, an increase of 15.1 percent compared with the same period a year earlier, bringing the grand total to 56.7 million customers.

As for me, I think I'll sign up for the long distance calling card and some ear buds.

Do you think calling cards, $15 discounts and free ear buds are a good outcome for consumers in this case?

By Annys Shin |  November 14, 2006; 10:00 AM ET Legal Battles/Settlements
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Comments

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The only people who win in a class action suit are the lawyers.

Posted by: lawgirl | November 14, 2006 10:19 AM

Yeah, I got that notice too. What kind of crappy deal was that? You had to spend more money than you ever would have gotten from the vouchers, either by extending your contract or purchasing merchandise. Just another in a looooooooong series of reasons we're giving up Verizon Wireless the minute our contract expires.

Posted by: NAC | November 14, 2006 10:27 AM

Too bad you can't choose an ceramic dog.

Posted by: Kim | November 14, 2006 10:36 AM

Oy! I, too, received this last week and immediately tossed it into the trash. After spending 10 minutes trying to figure out what the suit was about and the "benefits" I decided that it was not worth any more of my time. Had it been an immediate $25 or $50 usage credit I would have completed the paperwork, but this is absurd.

I have probably received eight of these over the past year and pursued just one, also from Verizon Wireless, related to deceptive advertising for the Motorola V710 phone's Bluetooth capability. I thought that I was going to get a check for $150 from Verizon, but it turned out that I needed to have the bar code from the package along with my receipt which are now long gone.

The best, however, came from Eastern Motors which pretty much agreed to sell me a used car at a very high interest rate since I was supposedly turned down for a car loan from them. Not really sure how I got on this list, but you would need to be REALLY desperate to take them up on this offer.

Posted by: Lester Burnham | November 14, 2006 10:39 AM

Lawgirl is right on. The hired guns get millions and you get a coupon. Since it was Verizon you had to know it was crooked from the start. I am a stockholder and they cheat me too.

Posted by: Steve | November 14, 2006 11:15 AM

I received the same thing in the mail and tossed it after reading the gobbledegook it spouted, probably the same action taken by 95% of the others that received it. If it had been a check for $15 - 100% of people would have cashed it. As it stands, Verizon is losing very little money so how is that an incentive for them to stop their illegal activities?

Posted by: hang up | November 14, 2006 11:59 AM

"The only people who win in a class action suit are the lawyers."

The cell phone providers seem to win too.

Sprint was sued in a lawsuit and a few months ago I got a crappy offer for a settlement much like what you outlined.

If the FCC would just do its job...

Posted by: cellssuck | November 14, 2006 12:03 PM

These crappy class-action lawsiutes should be made illegal, or, at least, regulated, saying that, for example, the lawyers cannot keep more than 1% of the proceeds, and that customers must get cash, not coupons.

Posted by: Elle | November 14, 2006 12:17 PM

Last month, in an airport, I overheard a snippet of someone's cell phone conversation: "I've got two chargers but only one battery." I thought to myself, he's talking on his cell phone about his cell phone. Which led me to the next thought: if he didn't have that cell phone, the conversation would be unnecessary.

Why do so many people put up with such rampantly unfair business practices and shoddy customer service over such a useless device? Civilization will go on, as it has for centuries, without cell phones. Give $50 a month to charity.

Posted by: Phil | November 14, 2006 12:54 PM

These class action settlements are rip-offs to the nth degree! Do the lawyers, judges and companies involved think that consumers are really dumb enough to fall for this crapola? Why in the world would you need a long distance calling card when long distance is FREE on your cell phone?

Posted by: Anonymous | November 14, 2006 1:33 PM

I have long since lost count of class action mailings. Since the dot-com bubble I must have seen a dozen or more. This latest Verizon suit was actually the first one that was reasonably understandable (if still basically worthless). Most are a morass of paperwork. As a small shareholder they could not possibly be worth the time for pennies on the dollar. Every last one seems like a massive scam to me and "there ought to be a law" etc.

Posted by: baffledbybs | November 14, 2006 1:54 PM

Ever check out the added Federal and user taxes on your regular phone bill, and the increasing 911 charges? It's enough to give you a headache. I've called 911 once in my life but I pay for it every month. I only have one phone number and an aswering machine. Total phone bill per month rarely goes over $17. If somebody wants to reach me while I'm on the computer, too bad. Just wait until I'm finished. Most times I don't even answer the #*@&^%! phone, especially not during political campaigns.

What can be so all-fired important that you actually NEED a cell phone and it can't wait until you get to work or home? I figure if there really is a crisis, somebody else will have a cell phone and I can just offer a couple bucks to borrow theirs. I did this once when stuck in traffic on the BW Parkway. I was going to a relative's house and then on to another family event. Traffic was backed up. The woman behind me had a cell phone so I offered her a couple dollars to call ahead and tell them I'm stuck in traffic. She gladly did it without accepting the money. Get a life people. Stop letting the cell phone companies run your lives.

Posted by: Southern Maryland | November 14, 2006 2:25 PM

Southern Maryland said:

"What can be so all-fired important that you actually NEED a cell phone and it can't wait until you get to work or home? I figure if there really is a crisis, somebody else will have a cell phone "

Um. if everyone thought like you there would be no one for you to borrow a cell phone from. Back when there were pay phones having a cell wasn't that important. Now if you can even find a pay phone chances are it'll be out of order. As for why anyone would need one: if your car breaks down calling AAA from the comfort of your (broken down) car is preferable to trying to find a pay phone or waiting for a cop or someone to come along to help you.

Posted by: just a thought | November 14, 2006 2:59 PM

I received the same class-action settlement from Verizon. Of course, only the lawyers are getting anything of value--earbuds, puhleeze.....

My solution is to opt-out of the class any time I am a offered to join a class-action suit. I seriously hope that this decreases the fees that the lawyers make. Plus I am then free to bring my own lawsuit.

Posted by: Just say No | November 14, 2006 3:07 PM

Yeah, I got that notice, too, and my reaction was, basically, "...whaaaa...???" Why oh why oh why can't the judge, or God, or whoever decides these things, make Verizon send me a CHECK??? Or give me a credit on my account??? They have my name. They have my address. Give me some freakin' cash, dudes.

Posted by: h3 | November 14, 2006 3:43 PM

Hmm,

Why cant't they disgourge some of their cash. If you do the crime than the judge should make them do the time.

If they can't pay then they too can go the bankruptcy route.

I figure one company goes down this sink hole. All the others will suddenly become model citzens.

Posted by: Hal | November 14, 2006 3:53 PM

Yes, I got it, read it, tossed it too. As I see it, if they'd sent $15 checks to everyone my phone bill would have certainly gone up AT LEAST $15, because I'm sure Verizon would not let a little thing like a class action settlement ruin its bottom line.

Posted by: KiKi | November 14, 2006 4:30 PM

At the very least the people hurt by the companies actions should get cold hard cash, no couponing allowed. That way we don't have any hidden deals between the companies lawyers and plaintiffs that result in the company getting to replace real losses with an ad campaign while all the Lawyers get paid.
They lawyers should only get some multiple of what consumers get, so if we get worthless coupons they get 10k worthless coupons.

Another solution might be to limit the precentage of the gross (not the NET) the lawyers can get. Again the Lawyers can go for broke in total damages, but they won't get it all. You might have to only have the precentage limits kick in after xx dollars, but it would still help in the big cases.

Posted by: Muddy | November 14, 2006 9:57 PM

SouthernMaryland, did you get your fridge door fixed? :)

"if we get worthless coupons they get 10k worthless coupons" LOL that would be some poetic justice and motivation right there! You can buy earphones at the dollar store!

I got something similar for sprint. These companies are evil! I wish they would just send cash, and not try to get us to give them more profits in the form of buying their products or signing more contracts designed to further line their pockets. How is that a punishment to them??? Again, especially when your reward is locking you into a contract to pay them money! How is this justice at all?

The fine print:
"*By writing this article you have agreed to a one year contract subject to inflated early termination fees total to more than your total monthly fees for the life of your entire contract, hidden charges, more hidden charges, and laughable coupons leading to another contract with early termination fees in the event of a class action lawsuit. You also agree that we now own your soul and in the event of a lawsuit you might get a coupon good for 25% off some earbuds you can purchase at the local dollar store. Thank your for being a valued customer and lining our pockets. We know you don't have much of a choice as our competitors are just as heartless, and it's our intent to ensure that you continue to enjoy our service, as shoddy as it may be. If you have any questions, please call our toll free customer service number where you will be placed on hold indefinitely, hung up on, brushed off, told your problem has been fixed- when in fact it hasn't and you'll have to call back again and hope you have better luck after wasting more hours of your worthless life on hold, with the final result being that your credit will be damaged when we overcharge your account and you refuse to pay in a futile attempt at seeking justice. We will deny all accusations that you attempted to dispute the charges as any record of your supposed attempted calls will be deleted, however we reserve the right to offer you a coupon good for a limited credit to your account that must be used in one month, or earbuds, so long as you sign a new year long contract and pay all applicable hidden fees. As previously stated in the contract, we own your soul. Lawyers and judges have cell phones too. We own their souls. Failure to be in whole hearted agreement with the terms of this contract, which is subject to change without notice, will result in a requirement to sign a year long contract subject to the stipulation that you sign another year long contract subject to these terms."

Posted by: Chris | November 15, 2006 10:56 AM

The film Brazil concerns a government that has outgrown its own ability to administer itself - leading to a situation of both extreme repression AND ungovernable chaos. That, in a nutshell, is the Verizon Corporation today. And as with the fictional state in the film, escape may be nearly impossible, but there is no other option; if you try to fight it from within, it will bury you.

Posted by: Terry G. | November 15, 2006 11:16 AM

What they should do is allow anyone that is part of the settlement to terminate their contracts without paying early termination fees. From the discontent I'm seeing here, that sounds like it would really hurt verizon's bottom line.

Posted by: student | November 15, 2006 11:20 AM

Student, such radical thinking is in violation of your contract, and as such is subject to hidden fees and the renewal of your contract. In fact we make it very easy for you to terminate your contract without paying early termination fees- simply sign a new contract with us. If you have any questions please feel free to read above fine print and call our toll free number.

Posted by: Chris | November 15, 2006 11:28 AM

"Service discounts and vouchers for ear buds is also more practical for the company to implement than sending everyone a $15 or a $30 check, which would require a big cash outlay."

I wish reporters wouldn't write things like this; it just gives me agita. It is not "more practical" -- I assume that's the phrase of the trial lawyers, not Ms. Shin's. It is cheaper. Big difference.

Posted by: David Nieporent | November 19, 2006 6:22 AM

If Ms. Shin is really interested in a consumer-friendly story, she might consider the collusion between lawyers, so-called "consumer groups", and Congress (judges, after all, for the most part are implementing what the legislative branch passes) to fleece consumers. Milton Friedman, the renowned free-market economist who died last week, long criticized this type of collusion between big business and government, all designed to maintain what are in effect state-sanctioned monopolies.

Instead of standing up for the average consumer, the legal profession and "consumer groups" (very likely sham front-groups set up by legal firms) are simply participating in the feeding frenzy. Now there's a story -- but perhaps a story the preying classes do not want the WaPo to write.

Posted by: chiluchor | November 19, 2006 6:33 AM

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