07/18/07 woes of a 2 year contract
(this is rather long, but you`ll find it very helpful. NOCS)

No escape from early termination fees

Quick quiz: Do you know when your cell phone contract expires? The question isn't as easy as you'd think -- and getting it wrong could cost you hundreds of dollars.

Yon-Paul Siebeneck, of Salt Lake City, Utah, went shopping in a Sprint store last fall and said he was told that both his family cell phone contracts would expire on Nov. 30, 2006. His wife, Chris, even called Sprint to double-check, he said. Believing they were both cell phone free agents, on Dec. 14, he purchased two new phones from a rival cell phone firm and canceled his Sprint phones.

But in January, a Sprint bill arrived for more than $300. Siebeneck's two contracts, Sprint now said, were in force until the end of January. So after paying for nearly 23 months on two two-year contracts, Siebeneck was now stuck two early termination fees of $150 each. Adding insult to injury, taxes were applied to early termination fees, so the total bill was almost $340.

"We would have waited until the expiration dates to renew or change service, being only a month away," Siebeneck said. The monthly bill was only $35 per phone. "It would be irrational to cancel a contract with early termination fees a mere month prior to that date."

Siebeneck dug up his paperwork and found that the original Sprint contract he signed indicated it expired in August 2006. He says he doesn't remember doing anything that would have extended it six months.

So Siebeneck, 38, dug in his heels and refused to pay the bill. Sprint took a hard line, too, transferring the debt to a collection agency, which is calling and writing demand letters. Meantime, with interest and penalties, the debt has swelled to about $450.

Sprint says it's done nothing wrong and is simply following the terms of the contract.

"We reviewed (the situation) and our records show that all the appropriate procedures were followed," said Sprint spokeswoman Roni Singleton. She said the firm couldn’t provide additional details, citing privacy rules.

Siebeneck is likely to lose the dispute even with paperwork indicating his contract should have ended last August, consumer attorneys say. It may not seem fair, but cell phone companies can extend consumer contracts with a simple verbal exchange, which can take place during virtually any telephone conversation with customer service.

Yon-Paul and Chris Siebeneck
Consumers who change their monthly minute plan, add text message service or even call to dispute a late fee sometimes find they’ve made new two-year commitments to their cell phone provider, said Ed Mierzwinski, program director of the consumer advocacy organization Public Interest Research Group.
Operators are supposed to clearly explain the contract extension, but that doesn't always happen.

Extensions can be applied "based on any communication with consumer where any supposed change is made," he said.

Siebeneck never received written confirmation of the contract extension. Sprint’s Singleton said written confirmation notices are not required, but added that "I'm sure there was a verbal agreement."

FCC didn't help
Siebeneck has complained to the FCC, which opened an inquiry. But Singleton said Sprint has satisfactorily proved to the agency that Siebeneck terminated his contract early and the fee is legitimate.

But even though Siebeneck is getting calls from debt collectors, and his credit score is suffering, for now, he's not budging.

"It's not about the money,” he said. “It's the fact that they misled us into thinking we were clear. I shouldn't have to pay."

Siebeneck is hardly the only consumer frustrated with early termination fees. In 2005, PIRG released a study showing that about half of all cell phone consumers would switch providers if they didn't have to pay early termination fees.

'A rogue industry'
“This industry is virtually a rogue industry," said Mierzwinski, who helped write the report, titled "Locked in a Cell." “Their business model is to see how much of this they can get away with.”

The practice has not gone unchallenged. Sprint, Verizon and Nextel all are facing a class-action lawsuit in a California state court over early-termination fees.

In many cases, "People are clueless that their contract has been extended, they just don't understand," said Stacy Canan, a consumer lawyer for the AARP who is co-counsel on the class-action suit. "Wireless companies use any event to as a mechanism for locking customers in for another two years."

Cell phone companies often defend the fees as compensation for subsidized cell phone handsets. Consumers get cheap phones in exchange for service commitments, they say, so they are entitled to compensation if a customer quits early.

But that theory falls apart in the case of extended contracts, said Jacqui Mottek, the lead attorney in the California lawsuit. A consumer whose two-year contract becomes a three-year deal would have already paid his debt to the cell phone company, she said.

Mottek is arguing that the fee is really a penalty, and under California law penalties must bear a connection to an actual cost incurred by the company.

The California case was certified as a class-action case last summer, and it includes any California consumer who has ever paid an early-termination fee. The cell phone firms have filed a motion for summary judgment, which the plaintiffs will answer shortly, Mottek said. Still, any relief from the lawsuit is several years away.

And it wouldn’t help Siebeneck anyway, since he doesn’t live in California. In fact, Mierzwinski didn't have much good news for him.

"It is difficult for individual consumers to get satisfaction," he said, adding that Siebeneck will almost certainly have to pay the bill to preserve his credit score.

Rather than fight a losing battle against the cell phone companies, consumers who feel they’ve faced unfair early-termination fees should complain to the FCC and their congressional representatives.

"Only meaningful action by the FCC or a legislative change will ultimately make a difference," he said.

RED TAPE WRESTLING STRATEGIES

There are a couple of things Siebeneck can do. The Fair Debt Collection Practices Act offers several helpful provisions. Consumers can contact the debt collector in writing and instruct it to cease all contact. After that, other than specific notices of legal action, the collector must stop harassing the consumer. More detail on how that law works are offered at the FTC's Web site. The letter should also tell the debt collector that the bill is in dispute and ask for any evidence the firm has of the debt.

He also can contact the credit bureaus and dispute the negative entry in his credit report and ask for a "reinvestigation." That begins a legal process which can at least stall the negative impact of the unpaid bill. Reinvestigations can be initiated online with Experian, Equifax, and Trans Union.

Third, Siebeneck should ask Sprint for evidence that he agreed to a contract extension, including copies of telephone call recordings. Sprint may not be able to produce the evidence, which would bolster any potential legal case; or the company may decide producing the paperwork is too much trouble, and abandon the case.

But for now, consumer lawyers agree, if Sprint sticks to its guns, Siebeneck will either have to pay up or find another lawsuit to join.



READER COMMENTS

The "consumer lawyers" you contacted are not very well informed.
I had one instance like this and met two others who had done the same and fought.
I sent a short and polite letter, by registered mail, denying any action on my part to extend my contract and requesting any definitive information they had (Signature, voice recording, etc.) that would indicate they had.
I got bills and dire sounding demands for payment for a few months and then they went away.
No credit report, no suit.
Just keep records, be firm, be polite, and don't be intimidated.

(Sent Jul 17, 2007 7:21:58 AM)

It looks like our legislators need to get control of our cell phone companies. This is the same as taxasion without representation. Rember the Boston Tea Party.

(Sent Jul 17, 2007 7:27:30 AM)

They (AT&T/Cingular) have another trap. It's called, "We're sorryt for the poor reception. We can fix the problem but you will need to upgrade your equipment!" Causing a new contract and they won't tell you about the extension. It, usually happens when you change your billing address, indicating a move. All of a sudden, calls are dropped and roaming charges appear stating you're in a non-coverage area.

Rodney L. Staley Sr. Chester, Virginia (Sent Jul 17, 2007 7:28:14 AM)

Speaking about subsidized phones. Where's the subsidy on the 2-year contract with an iPhone?

Nepkarel (Sent Jul 17, 2007 7:30:29 AM)

I HATE Sprint They screw up my bill EVERY month!!!! My husband are stuck in a two year contract; however, Iv'e heard that there are ways around breaking contracts e.g. moving to an area that doesn't have service, join the armed forces(lol)ect.. We live in an area of town that kind of sits in a valley, so some of our friends won't even have any service when they try to use their cell phones. I do get service, but my calls often get dropped when I try to call my husband (free to one another), so I've decided that everytime one of my calls get dropped that I'm going to call and complain to the sprint store by my house, until they get sick of me calling everyday and know who I am am when they hear my voice. I was also told that if you have a contract that has no roaming charges to start switching it over to roaming mode and make as many long distance calls as you can. When you're in roaming mode you actually will be using other carriers and it cost your carrier for you to do so, and people have been known to get kicked out of their contracts for big roaming charges.

(Sent Jul 17, 2007 7:33:21 AM)

I just ran into the same issue. Because I changed my plan, my contract with Verizon was extended 1 year. I will be contacting my political representatives. The contract was to cover the inexpensive phone I purchased, as an incentive. It wasn't this way at one time. I don't believe US Cellular is this way, but I must check.

Jerry, Pekin, IL (Sent Jul 17, 2007 7:44:59 AM)

Sprint has always been notorious for this. We've tried them three different times; cell & home phones;and had to fight tooth and nail to prove we were right. All you need is your contract and always keep names of who you've talked to. I don't recommend them to anyone and never will-nothing but shady business and everyone should report them to the FTC; we did. They also dropped their quest for outrageous fees.

Sis - South Carolina (Sent Jul 17, 2007 7:45:24 AM)

Unless the courts determine that such actions by the cell phone companies is illegal, nothing will change.

The politicians will not change a thing because the cell phone companies contribute to campaigns.

Do notice the campaigns contributions and corruption all start with a "C".

When Russian President Nikita Khrushchev visited the United States and the theory of campaign contributions was explained to him his comment was "that's just a different way of saying corruption.

drose, Clearwater, FL. (Sent Jul 17, 2007 7:46:50 AM)

So... even if we call to complain about a cell phone bill, or inquire about services without purchasing them, we might be "reactiviting" our service contracts with Sprint or another company? Even if I never verbally agreed to a new contract, I could be put on a new contract just by calling customer service to ask questions ?

(Sent Jul 17, 2007 7:47:53 AM)

A similar situation happened to me last January, but with a different ending. In December of 2006, Sprint, who was my cell phone provider, notified me that I was due for a cell phone update (during a phone call that I initiated). I had intended on inquiring when my contract ended and they told me January 1st. At that time, I told the salesperson that I was going to switch providers. I waited until the middle of January to make the change. Two months or so later, I noticed a charge on my bank statement of $300 by Sprint. I quickly called Sprint and inquired as to why I was charged this amount. I was told by a supervisor that it was an early termination fee for two cell phones, and that I had renewed my contract during the phone call in December by changing my plan. I told her that makes no sense, why would I change my provider knowing that I had renewed my contract in December? She was speechless. Then I told her, I have been a faithful customer to Sprint for years and years, and the only reason I had been unable to switch providers earlier than now is because if you make any sort of change at all to your Sprint cell phone plan, your contract automatically renews. She asked me to hold, and after a few minutes, she returned and informed me that she agreed it made no sense that I would switch plans after renewing a contract. Recently, I received a refund for the early termination fee.

Rebecca, Alexandria, VA (Sent Jul 17, 2007 7:50:27 AM)

The consumer asked the FCC for help and the FCC states Sprint proved proof of early termination, what proof was provided to the FCC? The consumer has the contract that shows his ending date, if Sprint provided proof to the FCC why was this proof not passed on to the consumer who opened the complaint? It looks like the FCC just took Sprints word for it and the consumer suffers because of it.

If the FCC did receive proof, why are they hiding what they received? There is no privacy issue since the consumer opened the complaint, he should receive all the information the FCC received.

Jim M. , Pittsburgh (Sent Jul 17, 2007 7:53:48 AM)

oh for crying out loud - does anyone not know the law?

Mr. Siebeneck sends a letter to Sprint and the Debt collector claiming that he 1) does not owe the money and 2) does NOT have a valid contract after November 30 with Sprint.

The debt collector is required to obtain PROOF that the contract existed.

Assuming the debt collector gets a 'statement' from sprint the contract was extended [for hwo long Mr. Reporter? You fail to provide a CLEAR factual explanation - was he in a 6 month extension or a one year deal?] - it will NOT contain Mr. Siebenck's signature - I presume.

At THAT point Mr. Siebenek sends ANOTHER letter to sprint and the debt collector informing them that 1) he does NOT have a contract with sprint after November 30, 2) denies agreeing to any contract extension, and 3) will sure for defamation of character any entity which reports the credit 'problem' to a credit reporting company without specifically detailing the nature of the customers dispute. Thats what the LAW sez - its not California or New Jersey law, its federal.

At that point, Sprint and the debt collector need to prove that a contract extension exists. Did they waive a late fee? Is it in the contract that waiving a late fee causes an extension.

ANYONE can CLAIM anything they want - the issue is proof for a court. How does sprint PROVE a verbal contract extension? Is there a tape? Hmmm -that might be interesting as to establishing clarity of the language used to extend the contract and might itself prove a unfair trade practice.

Back to Proof- can they bring in the telephone call center person? How do they, after 100's of calls in a week, remember this one? As a judge I'd be awful suspicious of such a memory - which leaves 'their business records' they offer as evidence. While admissible they are not cross-examinable. Mr. Siebeneck denies agreeing to extend the contract- how do they cross examine that testimony with business records? They can't.

At the end of the day - in 95% of cases - absent a recorded call with his voice on it - he wins. Once he wins his credit report is cleared and he can then sue the debt collector and Sprint for his attorneys fees for malicious prosecution. Sprint WILL Fold - you just need to push the right buttons.

As a consumer reporter - you need to better provide the facts and research existing law. You might also have wanted to speak to an actual lawyer - not just one who plays one on TV. The FCC could care less about anyone's financial transaction - the Fair Credit Billing and Collection Act does. . . .

Joe F. bloomfield CT (Sent Jul 17, 2007 7:55:55 AM)

Another example of big business holding out the carrot so they can whomp you with the stick. The moral is, get it in writing. And in the meantime, contact your representatives about getting the cellular industry to follow full-disclosure, fair trade practices.

Holly, Portland, ME (Sent Jul 17, 2007 7:57:33 AM)

GARBAGE and unfair to the consumer. Sprint likes to steal. I joined them in December - for two years. Only 18 months to go. I can hardly wait to drop Sprint.

(Sent Jul 17, 2007 8:00:29 AM)

I went through this with Verizon. When I moved they talked me into changing my cell phone number to a NJ number. No one told me it would extend my contract 2 years. When I tried to cancel they hit me with an ETF. I fought it and demanded proof. After 3 months they waved the ETF based on thier records.

Some times you win, most of the time you don't.

Rich, Kenvil, NJ (Sent Jul 17, 2007 8:01:27 AM)

Another thing to watch when you terminate a mobile phone contract is the final billing. I cancelled my phone one day after the two-year period was complete, but my carrier (Cingular/ATT) had already generated a bill for the next month's service. In a number of the discussions that followed with service reps to clear this up, they insisted that I would have to pay this bill even though it was an advance billing for a period beyond my termination date. It took about a month of numerous calls to finally clear this up, even though they always acknowledged that I had properlly cancelled my service after the 2-yr contract period.

In my experience, you have to keep referring to the facts, and hopefully you will finally find someone who is competent to understand (or is it willing to acknowledge?) the issue and then close the account properly. I'm sure many people just give up and pay, however, which perhaps is the outcome they are intending to achieve....

Michael, Houston, TX (Sent Jul 17, 2007 8:02:14 AM)

I would ask Sprint to initiate a binding arbitration which is agreed to in most cell phone contracts which will be a cost to them almost as much as what they recived from the collection agency.

(Sent Jul 17, 2007 8:02:54 AM)

Another 800 pound guerrilla! Corporations that unilaterally change written contracts on the flimsiest of verbal exchanges which they don't even have to confirm later in writing are symptmatic of our loss of democratic protections. Our country - and the world - is gradually becoming subservient to big business. Time to re-assess and do something about this before we no longer can. P.S. I'm an older male conservative and I never thought I'd ever write something like this!

RND, New York (Sent Jul 17, 2007 8:02:55 AM)

Do you feel helpless? Feel like your elected representative doesn't know you exist, and doesn't care? Welcome to national politics in a corporate world. If the average person went to court to enforce a contract extension that had absolutely no evidence it ever existed, they would be laughed right out of the building. There is a solution, though. Just donate millions of dollars to various politicians campaigns and you too can help dictate new laws and regulations. Oh yeah, there is one other solution. If your various representatives refuse to correct these types of problems, don't re-elect them. Then, so long as the Supreme Court doesn't put them in office, you might get some actual representation, but I wouldn't count on it.

Rick Lee, Ma. (Sent Jul 17, 2007 8:04:04 AM)

Cell phone companies's policies merely adhere to Washington's continued eroding of consumer's rights vis a vis recent Security & Exchange commission's earnings reporting policies relaxation. In the end, big business is continuing to win the fight against the American consumer.

(Sent Jul 17, 2007 8:04:47 AM)

SPRINT ..is absolutely notorious for this type of monkey business..! You don't even have to have contact with them and they extend your contract for just "thinking about making a change"..!

They also purposefully have a CSR mention contract changes to "bait the customer" into a minor change and then extend the contract based on the verbal exchange "even if you said no".

Sprint forums are jam packed full of negative SPRINT comments and the fact they have the "worst CSR's" in the industry ..!!!

When I terminate my SPRINT contract .."I plan to get the CSR's name, employee ID, date, time and the name of thier first born child" ..as evidence of termination date ..!!

Joe, Oxford, Michigan (Sent Jul 17, 2007 8:05:43 AM)

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