Anyone who has purchased and owned a cellphone over the last few years likely understands the absurdity and craziness of Early Termination Fees (ETF). Years ago, ETF’s were put in place by wireless providers who didn’t want customers to purchase subsidized smartphones and then immediately sell it for full price on web-sites like EBay.
Wireless carriers realized that they could make a nice profit off of customers leaving their service. So:
- Verizon began charging customers $175 to leave their contract early.
- AT&T responded by charging customers the same amount ($175) for an ETF.
- Then Verizon bumped that up to $350 for no apparent reason (to be fair, $10 was taken off the ETA for every month the customer stayed on contract).
- AT&T decided to then raise their ETF to $325.
- In July 2008, a California judge ruled that Sprint’s early termination fees were illegal and fined them $73 million.
- Google and T-Mobile almost got in trouble for charging some Nexus One customers separate ETF’s totaling $550 if the customer left within four months.
But this issue isn’t just something that happens in the United States. Recently, British telecom Vodafone was found to have breached consumer law in England. The Competition and Consumer Protection Commission found that Vodafone was “not providing adequate information to consumers on the various processes available to them for cancelling contracts.”
Under the European Consumer Rights Directive, telecoms such as Vodafone must now have clear directions on their web-sites about a customers right to cancel a contract.