By Evan Hollins
Hilltop, Howard U.
(UWire)--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.
"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."
-Cristin Jones
"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.
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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."
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