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Judge Rules Sprint Early Termination Fees Illegal

ScuttleMonkey posted more than 5 years ago | from the bad-news-for-lock-in dept.

Communications 343

Antiglobalism writes to tell us that an Alameda County Judge has ruled against Sprint Nextel in a class-action lawsuit, awarding customers $18.2 million in restitution for early termination fees. "Though the decision could be appealed, it's the first in the country to declare the fees illegal in a state and could affect other similar lawsuits, with broad implications for the nation's fast-growing legions of cell phone users. The judge - who is overseeing several other suits against telecommunications companies that involve similar fees - also told the company to stop trying to collect $54.7 million from other customers who haven't yet paid the charges they were assessed. The suit said about 2 million Californians were assessed the fee."

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343 comments

Case Law Precedent? (2, Interesting)

conner_bw (120497) | more than 5 years ago | (#24419921)

This sounds like a good time to get one of those $199 subsidized iPhones and walk away from the contract.

But isn't the whole mortgage crisis [dissidentvoice.org] based on the same principle? People walking away from their contracts?

Re:Case Law Precedent? (5, Insightful)

Osurak (1013927) | more than 5 years ago | (#24419981)

This sounds like a good time to get one of those $199 subsidized iPhones and walk away from the contract.

But isn't the whole mortgage crisis [dissidentvoice.org] based on the same principle? People walking away from their contracts?

No, the mortgage crisis was caused by a combination of irresponsible lending practices by lenders and people attempting to live beyond their means. People walking away from the contracts was an effect, not a cause.

Re:Case Law Precedent? (0)

Anonymous Coward | more than 5 years ago | (#24420177)

Exactly. One classic example I know of:

A couple who made a combined net income of $5000/month were given a loan, by credible, big name lender, where their monthly payment was going to be $3500. This couple also had 2 car payments, credit cards, and all the other usual irresponsible US household money leakages (big flat screen tv, cell phones, expensive digital cable package, etc). Needless to say within 6 months of blowing through their saving is came down to deciding to sell the house or starve to death. They had no money left for monthly essentials, like food.

Re:Case Law Precedent? (2, Insightful)

retchdog (1319261) | more than 5 years ago | (#24420411)

Incredibly, I'm going to have to pay back my student loans while these "classic" parasites get a free ride.

Re:Case Law Precedent? (5, Insightful)

AKAImBatman (238306) | more than 5 years ago | (#24420559)

I don't see where the "free ride" comes in. They lost the home, wiped out their savings, probably increased their debt, and (almost certainly) killed their credit rating. It will be a long time before they can attempt to own a home again, even if we assume they've learned from the experience.

Re:Case Law Precedent? (2, Insightful)

notamisfit (995619) | more than 5 years ago | (#24420835)

They had six months living in a house they knew they couldn't afford. And if they didn't know, they should have known. Sadly, the lenders knew they were going to get their fix of government bailout crack regardless, and more than likely rubber-stamped the application without thinking twice.

Re:Case Law Precedent? (5, Insightful)

j79zlr (930600) | more than 5 years ago | (#24421033)

These people weren't given a loan, they applied for it. Now you can say that the lending institution shouldn't have given it to them, but they should have also known that they couldn't afford it. $5,000 net monthly would seem to be around $75,000 anually, $3,500 in monthly mortgage payments would be about a $600,000 mortgage. No rational set of human beings could begin to think that they could afford that. Undoubtedly they thought they could tough it out for a few years, make a huge return and move on. I feel absolutely no pity for them. They were idiotic and got exactly what they deserved. It shouldn't be the place of society to protect people from themselves.

Re:Case Law Precedent? (2, Insightful)

networkconsultant (1224452) | more than 5 years ago | (#24420367)

Lendee: My boss is a dick and I have no proof of employment! Morgtage Broker: We get commissions anyway so we'll get you a "Liar's loan" for the downpayment and the bigger the morgtage the bigger the commish! you just have to pay interest on the loan at market rates. Lendee: Awsome, so the government will subsidize my american dream? Morgtage Broker: Exactly.

Re:Case Law Precedent? (3, Informative)

Red Flayer (890720) | more than 5 years ago | (#24420375)

To be a little more complete, the easily available credit also increased demand on real estate, thus driving prices upward drastically... and the combination of tightened credit availability and a slower economy has now caused prices to fall, leaving people in a negative equity situation.

Some of the problem is people signing stupid loans (A 5-1 ARM with a ridiculous teaser rate?). Because credit tightened up, in order to sell the home (or refinance) before the fixed period was up (almost everyone's plan), they would need to take a loss... which they couldn't do because they were in a negative equity situation.

I think that more so than people choosing to live beyond their means, it was people paying too much for properties they bought... the necessary market correction in property prices left a lot of people in bad shape. Speculation that property prices would continue rising is as much to blame as bad lending practices and poor budgeting.

Re:Case Law Precedent? (4, Insightful)

AuMatar (183847) | more than 5 years ago | (#24420481)

ARM5-1 isn't a stupid loan. Its a low rate for 5 years. The idea is that before the 5 years are up you either sell, or refinance to avoid the higher rate (possibly to another 5-1, possibly not). It's actually a smart idea if you don't plan on living there 30 years. Now if you want a bad loan, look at interest only, 3 month ARMs, and negative amortization loans.

Re:Case Law Precedent? (5, Insightful)

Red Flayer (890720) | more than 5 years ago | (#24420611)

It's a stupid loan if you do not foresee a collapse in property prices in your area due to near-future restrictions on easy credit. This is what happened to many tens of thousands of people, and why so many people are hammered by a negative equity situation. They cannot sell, because they owe more than the vlaue of their home and do not have cash reserves... and theycannot afford their ballooned payments.

Sure, the lender will (if they are smart) renegotiate with the borrower... but many borrowers find it a better proposition to walk away and declare bankruptcy.

Yes, IO 3 month ARMs are REALLY bad... unless you're just flipping the property. Negative amortisation loans, same deal. Either case, you better know what's going on in the housing market locally before you jump in.

Re:Case Law Precedent? (1)

hyperz69 (1226464) | more than 5 years ago | (#24420745)

Thats not a screw you loan. Getting a 500k house with a 3-1 ARM at Fed Rate *When it was 1.5%* interest only with a Ballon Payment. while your working Part Time Cashier at Wally World... Now thats a loan to loose your house too!

Interest Only makes sense for some people (2, Interesting)

grahamsz (150076) | more than 5 years ago | (#24420789)

An I/O loan would be great if you were on a variable income - perhaps self-employed or on commission.

That way you can make IO payments in the leaner months and when you get a big check you can pay down your loan.

There's nothing inherently bad about ARMs either and even NegAms have a place.

The real problem here is that people signed things without reading them over and understanding them. What percentage of the general public could even work out a loan payment?

I had a slightly surreal experience buying a car. We negotiated $20k even with a 0% rate for 5 years while I was sitting with the finance guy at the dealership.

Me: "Ok, so that's $333 a month"

He shot me a strange look, and proceeded to punch the numbers into his calculator (including the 0% interest rate) and was surprised to get the same figure as i'd worked out in my head.

If the finance guy are a car dealership is that slow, i dread to imagine where the average person is.

Re:Interest Only makes sense for some people (1)

bigstrat2003 (1058574) | more than 5 years ago | (#24421117)

If the finance guy are a car dealership is that slow, i dread to imagine where the average person is.

Not being good at math in your head qualifies as "slow"? I had no idea.

Re:Case Law Precedent? (2, Interesting)

geekoid (135745) | more than 5 years ago | (#24420863)

there is no guarantee the house will be higher value in later years, especially 5 years away.
It's a bad loan, and a bad investment.

Of course, I am extremely hardline. I wouild make it illegal to have a home loan longer then 10 years, and not allow balloon payments.

Yes, people would still get homes, they would lust need to become more reasonably priced.

The cost of a home compared to income has become stupid. Compare it to 40 years ago.

Yes, I do own a home, my second one in fact.

Re:Case Law Precedent? (1)

Mr. Underbridge (666784) | more than 5 years ago | (#24420497)

To be a little more complete, the easily available credit also increased demand on real estate, thus driving prices upward drastically... and the combination of tightened credit availability and a slower economy has now caused prices to fall, leaving people in a negative equity situation.

Better yet, define that as a feedback loop - increased demand for real estate gave people a lot of equity they could use for even *more* easily available credit! Yay!

So you had people taking out loans they couldn't afford, to get money to pay credit card bills, which they rationalized by figuring they could re-fi next year when their house went up 25%.

Fun game of merry-go-round for a lot of stupid people...while it lasted.

Re:Case Law Precedent? (1)

Red Flayer (890720) | more than 5 years ago | (#24420685)

Fun game of merry-go-round for a lot of stupid people...while it lasted.

But an even more fun game for those of us who sold in 06 or early 07 and are now looking at buying on the cheap.

A coworker of mine sold his house in April 06 for $825,000. He just bought the same house back, with about 40k in improvements, for $675,000. There were two successive owners in the time he did not own the house. I wish I had his foresight... but I didn't get into the game until 2004, so my profits were much lower.

Re:Case Law Precedent? (1, Flamebait)

linzeal (197905) | more than 5 years ago | (#24420423)

The insane jumps in "fair market" valuation and the reasons for them are to blame. Manipulation of markets, flipping the properties, shopping for appraisals and far more nefarious dealings set the bar lower for ethics in yet another field in America. People everywhere were making money off real estate and most of them were idiots. Welcome to America, where as long as a gaggle of lawyers can successfully defend injustice or impeach justice in a court of law that lawyers (senators, judges and supreme court justices) create and abuse no one can touch you. Retroactive immunity should be prohibited under the constitution and approved by the people not by more fucking lawyers because I honestly believe that more heads should be rolling than just Countrywide and the isolated local condo scandal.

Welcome Real Estate Agents your place in hell is reserved between RIAA/MPAA lawyers and the most monstrous bratty children of the oligarchy. Enjoy being raped by the billionaire spawn you helped create you bastards.

Re:Case Law Precedent? (2, Interesting)

squarooticus (5092) | more than 5 years ago | (#24420849)

Actually, the root cause is that the availability of artificially cheap money (read: credit) by the Federal Reserve misprices risk: this has resulted inâ"at leastâ"the tech bubble in the late 90's and the housing bubble in the 00's.

Since no one in power recognizes or at least wants to admit that the Fed is the cause of these problems, expect a new bubble to appear soon.

Re:Case Law Precedent? (0)

Anonymous Coward | more than 5 years ago | (#24421097)

It wasn't the Fed who agreed that some form of statistical manipulation could turn a slice of consumer mortgage loans into a debt as secure as the Fed's own. The root cause (i.e. initial thing to be done wrong) was the credit rating agencies assigning higher-than-true credit risk values to the mortgage tranches.

Just because the Fed made money cheaply available doesn't mean I should put a bundle on number 7 at the roulette table. There's a proven-smart investor (Buffet) who's been commenting for awhile now about how much of his investment funds he's unable to invest because the prospective return on investment was less than the risk.

Re:Case Law Precedent? (3, Informative)

SydShamino (547793) | more than 5 years ago | (#24421003)

Yes, creating risky or bad debt by giving loans to people who cannot afford them was a key part of the problem.

But the reason the crisis has exacerbated, and badly hurt major financial institutions (CitiBank, IndyMac) is because the process of debt selling allowed bad debt to be masked as good debt. There were insufficient safeguards to make sure that the people (investors, businesses, financial institutions, etc.) that put their money into these debts knew that they were as risky as they truly were.

Consider the Freddie Mac situation. As a quasi-private company, Freddie Mac is directed to make a profit. However, as a quasi-government entity, they have special rights such as the right to use the Federal Reserve as their bank, and the right to guaranteed loans at preset rates. These guarantees made Freddie Mac have an impeccable credit rating, despite the fact that, to continue growing their profit, they kept buying more and more debt that was downright awful.

In other words, Freddie Mac's credit rating didn't reflect the junk nature of their assets. The same is true for CitiBank and IndyMac and other banks that held debt that they may-or-may-not have known was bad, but wasn't being shown as bad on their books.

Things that could have prevented this:
1) Congress has decided that our country is more stable when people own their own residence, so it encourages home ownership. Freddie Mac exists for this reason. I think this conflicts greatly with their charge to earn a profit. Wikipedia says this: "Both Alan Greenspan and Ben Bernanke have spoken publicly in favor of greater regulation of the GSEs, because of the size of their holdings and the widespread perception that they are government backed.", which to me indicates that they agree. This quasi-goverment thing doesn't work. They should have been government owned, or privatized completely.

2) To avoid your home-town bank from getting its fingers (and your money) dirty in less-than-reliable debt, the depression-era Glass-Steagall Act [wikipedia.org], among other things, prevented banks from offering things like investments and insurance. The late-90s Gramm-Leach-Bliley Act [wikipedia.org] repealed those parts, allowing banks, insurance companies, and investment firms to co-mingle. It's been argued that this relaxation of regulation also contributed to the crisis, as it allowed institutions that need to be stable for financial security (banks) to engage in the riskier activities of investment firms.

Re:Case Law Precedent? (3, Informative)

riceboy50 (631755) | more than 5 years ago | (#24420095)

I thought it had to do with irresponsible lending by the banks/borrowing by home buyers. Basically, the bar was lowered considerably by taking on high-risk mortgages as ARMs (Adjustable Rate Mortgages). When they tried to adjust the rate, the risk came back to bite them in the ass and the irresponsible borrower could not afford to pay it.

ARMs got a bad rap on that one (3, Informative)

grocer (718489) | more than 5 years ago | (#24420539)

An adjustable rate mortgage, in and of out itself is not bad. In fact, before the reforms brought on by Great Depression centralized home lending into one system, the local bank would give you a ballon loan for 5 or 10 years, then refinance it or bounce it, and so on until the house was yours. 30 year mortgages were an effect of the federal banking system and didn't become common until post-WW II.

The high risk mortgage comes in where people were allowed to outright lie about their income and took on mortgage products traditionally used by people who had sterling credit. But the key is the outright lie there...if you're making 20K and then the broker has fluffed and self-reported your income to 50K or 60K, it doesn't matter what kind of loan you have, it's going bad.

On top of that, everybody went "Real Estate always goes UP!!!" which is flat out wrong and then used that to rate a loan that should have been a D into a B or C, thus putting a whole lot less risk on paper and making mortgage backed securities look like treasury bonds when they more like junk bonds.

Re:Case Law Precedent? (1)

thedullroar (944296) | more than 5 years ago | (#24420885)

In addition to irresponsible lending practices and ill informed/stupid borrowing practices, the value of homes has gone down. For some people, the market value of their home is now less than what they owe on their mortgage, so (at least in the short term) they have no reason to pay their mortgage. In the long run, I suspect that the value will return to their house, but people who think about that are generally not the ones who get themselves into mortgage troubles.

Re:Case Law Precedent? (1)

SilverJets (131916) | more than 5 years ago | (#24420419)

I was just wondering if this will cause a ripple effect to the legality of penalties for early exit from any contract, not just a cell phone contract.

Any lawyers out there care to offer an opinion?

Re:Case Law Precedent? (1)

Lumpy (12016) | more than 5 years ago | (#24420577)

Nope the mortgage crisis was from idiots buying more house than they could afford and now defaulting on it.

Re:Case Law Precedent? (1)

compro01 (777531) | more than 5 years ago | (#24420879)

Which has always happened. The problem was lenders underrating the risk and puffing up the credit rating, which in turn puffed up the credit rating of their mortgage-backed bonds, which allowed them to sell them better.

Anybody think that this will change anything? (4, Insightful)

flanksteak (69032) | more than 5 years ago | (#24419945)

Prorated termination costs seem reasonable, especially given the subsidies on the hardware. I was surprised to see that Sprint is the only company that doesn't prorate. I figured the wireless companies would avoid any change that makes it easier for customers to change providers. When selling a commodity it's essential to avoid the profit-killing, competing-on-price, race to the bottom.

This will be appealed, so I don't see anything changing in the short term. The figures on the $55 million in uncollected fees is impressive. It would be interesting to know how much of that would be profit after subtracting the depreciated cost of subsidized hardware.

The disappearance of the 1-year contract bugs me, but at least it's easier to move up and down in rate plans once you've signed up.

And yes, it would be nice to have the option to buy unlocked phones from any vendor and use them with any provider, but I'd bet that less than a quarter of the customer base would make use of this on a regular basis. TMobile comes closest to supporting this now, but I left them when I got an IPhone and really do miss dealing with them. Their customer service web site is far superior to AT&T's.

Re:Anybody think that this will change anything? (4, Insightful)

Rayeth (1335201) | more than 5 years ago | (#24420043)

The subsidized phone cost is really the root of this problem. I wonder if America would just be better off if we moved to a system like in Europe and Asia, where phones cost much more, and the plans are significantly reduced.

Re:Anybody think that this will change anything? (4, Insightful)

Rob Kaper (5960) | more than 5 years ago | (#24420197)

Plenty of people in Europe have subsidised phones on contract. Of course you can also go pre-paid, or buy a phone seperately, or get a SIM-only contract.. but there's no system in Europe in place which prevents subsidised phones.

The big difference is probably that we can get any phone from any store with basically any out of half a dozen different operators while in the US in most areas you have fewer choices of providers, if what I've been hearing here is correct.

Re:Anybody think that this will change anything? (0)

Anonymous Coward | more than 5 years ago | (#24420337)

The US locks the phone to the carrier. You can't simply whip out the SIM and put in another like you can in Europe. So there's no buying phone X and getting a pay as you go SIM. You generally have to have a brickphone if you want PAYG or pre-pay. And you can forget getting a phone with one carrier and joining another just by changing the SIM.

Re:Anybody think that this will change anything? (3, Informative)

Sockatume (732728) | more than 5 years ago | (#24420507)

Most phones are locked to a carrier in Europe, too. Fortunately unlocking is ubiquitous and cheap.

Re:Anybody think that this will change anything? (3, Insightful)

flanksteak (69032) | more than 5 years ago | (#24421015)

America is also in the unusual situation of having two incompatible networks. The majority of US mobile phone customers are on CDMA, while only TMobile and AT&T are GSM. Even if you wanted to switch, the tech limits the choices.

Re:Anybody think that this will change anything? (1)

oldspewey (1303305) | more than 5 years ago | (#24420545)

The US locks the phone to the carrier. You can't simply whip out the SIM and put in another like you can in Europe.

I can get just about any phone unlocked for five or ten bucks at a nearby electronics mall.

Re:Anybody think that this will change anything? (1)

MaXMC (138127) | more than 5 years ago | (#24420603)

Here in Sweden the carrier lock usually lasts for the first 12 months of the contract and can then be unlocked for roughly $50.

Buy me out (3, Informative)

Sockatume (732728) | more than 5 years ago | (#24420487)

Also, operators (particularly resellers like Carphone Warehouse) are willing to "buy out" contracts to encourage people to switch. They eat the termination fee on your behalf. Phone Company X gets its subsidy, Phone Company Y gets its customer, Customer gets his free or cheap phone.

Canada on contracts (1)

phorm (591458) | more than 5 years ago | (#24420941)

I recently tried to get my girlfriend signed up with Roger's, using an existing phone, sans-contract.

Rogers no longer seems to allow *any* of their (weekend/evening/friends/etc) rate plans other than a by-the-minute plan without a contract. This doesn't work for my girlfriend, as she'll be out of the country for 4-6 months near the end of this year and early next, and doesn't want to be paying for a phone that's unused.

So we had to go with Telus, which tends to have much crappier building penetration (the Telus phone doesn't work indoors near as well as my Rogers phone), but allows you to sign up for any plan sans-contract so long as you already have a phone.

Re:Anybody think that this will change anything? (2, Interesting)

flanksteak (69032) | more than 5 years ago | (#24420291)

I don't know about Asia, but I know in the UK all providers offer free phones for 18-24 month contracts. Termination fees are prorated, in that you have to pay for the remaining months on the contract. If you get cold feet early on, this is a helluva lot more than the $200 you have to pay Sprint today.

The primary difference is that it's much easier to buy any old (or new) phone and buy a sim on any provider. The networks aren't anywhere near as locked down as they are here.

Re:Anybody think that this will change anything? (4, Insightful)

QuantumRiff (120817) | more than 5 years ago | (#24420301)

The problem is, that if you bring your own phone, (or purchase outright) you are still paying for the subsidized cost in the plans.. Personally, it would make alot more sense to me if they split out the bill so that your Cell Service was (for example) $45, and the Phone purchase was $5 each month. (instead of a $50/month plan). Then, there would actually be a benefit to bringing in your own phone. Cable Internet companies, at least in my area, do this, I pay for internet, and I pay $x/month on top for the "cable modem rental fee".

Re:Anybody think that this will change anything? (5, Insightful)

Volante3192 (953645) | more than 5 years ago | (#24420769)

Or how about after your initial contract runs out? Right now I'm in a 2 year contract with AT&T. I don't expect my $40/mo to go down after I "pay" for my phone, even though that's the whole theory behind the contract.

Since the phone is now mine, why don't I get a lower, unsubsidized rate?

Re:Anybody think that this will change anything? (1)

Colonel Korn (1258968) | more than 5 years ago | (#24420359)

The subsidized phone cost is really the root of this problem. I wonder if America would just be better off if we moved to a system like in Europe and Asia, where phones cost much more, and the plans are significantly reduced.

At least in Europe, plan length is reduced (and much more commonly prepaid per minute than in the US), not cost, at least for voice.

Re:Anybody think that this will change anything? (2, Interesting)

mc900ftjesus (671151) | more than 5 years ago | (#24420581)

You can do this in the US, the big problem is that you qualify for better monthly rates with a contract, this shouldn't be allowed. Phone costs are arbitrary in comparison to your plan.

In two years, a $99/month plan costs you $2376 before taxes. A $300 phone isn't such a big deal is it?

Re:Anybody think that this will change anything? (0)

Anonymous Coward | more than 5 years ago | (#24420749)

Of course America would be better off. And phone carriers would make less money. Which is why it's not going to happen.

Re:Anybody think that this will change anything? (3, Interesting)

superdave80 (1226592) | more than 5 years ago | (#24420801)

This would be a good thing, but ONLY if phones were required to be used on any network. Imagine shelling out $500 up front for a phone with company X. Then after a month or two, you realize that their service/coverage/whatever sucks. Then you try to switch to company Y, only to find out that your $500 phone ONLY works on company X's network. That $500 for the phone starts to look a lot like an early disconnect fee.

The good old days (1)

Gates82 (706573) | more than 5 years ago | (#24420995)

I wonder if America would just be better off if we moved to a system like in Europe and Asia, where phones cost much more, and the plans are significantly reduced.

I long for the days when this was reality. I remember dropping $200 for a phone and then choosing my service plan and not being tied to a contract. I had the same phone number for almost 10 years. Every few months I would look to see if there was a better plan available from my provider. Never happened the rates I had were consistently lower then newer rates and I would be required to go back on contract. What finally broke me down was needing to switch from TDMA to the newer networks. Two years later and I'm finally off contract again.

I miss the days when few people had cell phones and it wasn't a commodity. I was treated great by my provider (since I was off contract and had been a customer for so long anytime I have an issue with my phone they would typically send me a new one free of charge).

--
So who is hotter? Ali or Ali's Sister?

Re:Anybody think that this will change anything? (4, Insightful)

wealthychef (584778) | more than 5 years ago | (#24420201)

it would be nice to have the option to buy unlocked phones from any vendor and use them with any provider, but I'd bet that less than a quarter of the customer base would make use of this on a regular basis.

Maybe only a quarter of the customer base would use it, but everyone would benefit by the increase in competition that would result.

Re:Anybody think that this will change anything? (1)

jyoull (512280) | more than 5 years ago | (#24420363)

While it's not true for every company in every business, cellular companies in particular might, just for a change, try to avoid the "profit-killing, competing-on-price, race to the bottom" by offering other, non-price-bound differentiators.

An obvious differentiator would be some combination of responsive customer service + treating-customers-like-adults + a clear explanation of services available for purchase.

Right now all the money that would go into creating such differentiators is being poured into advertising apparently-identically-abusive companies that compete on price price price.

The carriers have created this reality by talking ad nauseum AT the market when they should instead be listening to current customers.

Re:Anybody think that this will change anything? (1)

flanksteak (69032) | more than 5 years ago | (#24420563)

Better customer service for a commodity purchase isn't usually enough of a differentiator for the average American consumer. Most of us don't even care about quality over price (WalMart!). Nextel used to push the business angle but ever since they got absorbed by Sprint you don't see those ads anymore.

Only Verizon really pushes quality in their advertising, and they're really talking more about call quality than customer support.

Most US phone providers focus on specific price reductions (Alltel's ads about calling your friends and TMobile's Fave5 or whatever it's called) or hardware exclusivity (iPhone on AT&T or Sidekicks on TMobile, and the Samsung clone on one of the CDMA networks).

So as much as I would like to see better service from mobile phone companies, I don't see them making the effort and then promoting it and expecting to get results.

Re:Anybody think that this will change anything? (1)

jyoull (512280) | more than 5 years ago | (#24421089)

Ah, they don't need to MARKET the customer service stuff, they need to DO it.

Even without the $$$ lock-in, there is an implicit switching cost to changing carriers, consisting of the search-and-compare cost + time spent making the actual change.

I'm suggesting they spend some money on retention rather than spending most of it on attempts to snipe from other carriers. This is the basis of the downward spiral to price-based differentiation.

I suspect that the primary motive to jump carriers is to get a free new phone as it's presently fashion-forward to have the latest handheld, whatever that may be this week. T-Mobile used to offer cheap or free periodic upgrades to existing customers, but stopped.... and I just checked and it looks like the upgrade offer is back again. They've also cut some service costs and removed a number of services whose explanations were incoherent at best. Maybe there's hope after all. I thank government-mandated number portability for this breakthrough.

Re:Anybody think that this will change anything? (1)

MaWeiTao (908546) | more than 5 years ago | (#24421229)

The problem is that mobile phone carriers aren't competing on price at all. They're competing on gimmicks. Take a look at the cost of plans for the different carriers. Comparable plans are pretty much identical in price amongst the most carriers. And they actively promote plans which in the long term puts uninformed consumers in a situation where they're spending even more.

Re:Anybody think that this will change anything? (1)

TooMuchToDo (882796) | more than 5 years ago | (#24420531)

I wanted an Iphone, but would rather stick with T-Mobile (I was an original Voicestream customer, have been with them almost 7 years). Good luck!

Re:Anybody think that this will change anything? (1)

flanksteak (69032) | more than 5 years ago | (#24420627)

Thanks. I actually got the phone for free (company xmas party prize), so I figured what the hell. Call quality is definitely poorer compared to my PEBL on TMobile, but I haven't figured out if its the phone or the network. Email and web browsing is the best, though. Maybe by the time the contract runs out I'll be able to go back to TMobile with an Android phone.

Re:Anybody think that this will change anything? (1)

gad_zuki! (70830) | more than 5 years ago | (#24420851)

>Prorated termination costs seem reasonable, especially given the subsidies on the hardware.

Not everyone gets discounted hardware. I bought my current PDA used off ebay and got no break from Sprint on my monthly charges. I'm paying for your whole because of this broken system. I should have the right to break my contract if I didnt get a free phone.

Not to mention, Sprint adds 2 more years for most changes. Discounted text plan? 2 year renewal. 2nd line? 2 year renewal. Move to family plan. 2 year renewal. Broken phone? 2 year renewal.

This whole system is out of control and has led to a copyright-like constant extenstion that is anti-consumer and just plain gouges people.

We should be able to cancel anytime and pick an unsubsidized plan for those of us who buy our own phones. The Europeans do this. why cant the Americans?

Re:Anybody think that this will change anything? (1)

Mordok-DestroyerOfWo (1000167) | more than 5 years ago | (#24421109)

I agree completely, T-Mobile's service (at least where I am in Texas) is on par with AT&T and their data plan rates are much competitive, though they're not 3G I can deal perfectly well with edge while I'm on my phone. I'm getting directions or checking sports scores, not streaming video. I only wish they weren't jacking up their text rates like everybody else.

This changes everything (2, Insightful)

SlashDev (627697) | more than 5 years ago | (#24419951)

If this goes through without appeal, other suits will follow and that will certainly impact plan pricing, since a large number of users don't want to leave their current provider because of those early termination fees.

I don't understand (3, Insightful)

FredFredrickson (1177871) | more than 5 years ago | (#24419961)

The article was light on details.. why did they decide that fees that are clearly stated in a contract before people entered the contract are now illegal?

I hate cell companies as much as anybody, but that's how they subsidise those cheap phone prices.

Re:I don't understand (1, Insightful)

Anonymous Coward | more than 5 years ago | (#24420179)

Just because it's stated in a contract, even if you agreed to it, doesn't make it legal.

For instance, you could agree to give up your firstborn in case of defaulting, but every court in this country would invalidate that part.

Re:I don't understand (4, Informative)

rcw-work (30090) | more than 5 years ago | (#24420231)

The article was light on details.. why did they decide that fees that are clearly stated in a contract before people entered the contract are now illegal?

Because cell phone companies aren't willing to negotiate contracts with consumers, and the few cell phone companies that consumers can choose from all have equally evil contracts.

Also, contracts are only valid if there's a quid pro quo - if there's no prorating, the judge may take that into account.

In the end, contracts are only binding if they are legal - you can't sell yourself into slavery, you can't contract out a hit on someone, etc etc.

Re:I don't understand (4, Insightful)

manekineko2 (1052430) | more than 5 years ago | (#24420245)

According to this article, it was a violation of California's unfair business practices act:
http://www.baltimoresun.com/business/bal-bz.sprint30jul30,0,2416808.story [baltimoresun.com]

"Wireless carriers say early termination fees are necessary so the companies can recover the cost of mobile phones, which they subsidize when customers sign long-term service contracts.

But the judge in her ruling said the contracts were "implemented primarily as a means to discourage customers from leaving" and that the company gave little regard to the cost of broken contracts."

And remember, in the United States, just because something is clearly stated in a contract doesn't mean the contract is enforceable. For instance, a contract to make yourself a slave will not be enforced by a court.

Re:I don't understand (1)

UID30 (176734) | more than 5 years ago | (#24420427)

While I haven't read TFA, I'd imagine that the early termination fees contradicted some interpretation of a law on the books in the state of CA. Vague? Well, yes. and no. Welcome to the law.

IMO, threat of early termination fees keeps subscribers paying far past the point of subsidizing cheap phones. Telcos take a back seat only to oil companies on the scumbag scale. I get a reminder of that every month in the mail.

Re:I don't understand (3, Informative)

mr_matticus (928346) | more than 5 years ago | (#24420529)

The problem is twofold. One, the ETF is charged indiscriminately, regardless of the value of the subsidy. This means that it is a deterrent from switching carriers for those who owe no subsidy. Two, Sprint does not prorate its ETF (or did not, as of this lawsuit) like e.g., AT&T does.

Addressing both of these concerns with a subsidy-recovery fee would be perfectly enforceable. The summary's implication that this may start a domino effect is a relatively obtuse statement.

Penalties for breaking contracts are upheld daily by law if disclosed. Penalties that are in no small part cost recovery, doubly so. However, it's been clear for many years that the cellular companies don't actually care about just covering their losses--otherwise they'd be able to tell you at any given point what your prorata share of the original hardware subsidy is. You as a consumer should also have the the right to pay the remaining subsidy amount plus a nominal penalty for processing ($~25), and then be placed on a month-to-month plan or walk away.

Service (1)

phorm (591458) | more than 5 years ago | (#24421009)

I've seen a lot of issues with "popular" cellular providers taking a dump in customer service. Previously, Telus was the big dog in town and would regularly screw customers over. In my hometown their grid was becoming overloaded, and I had a period of 4-5 months where calls mysteriously never made it through (straight to voicemail, and not due to my phone because others experienced the same issue).

Now I'm on Rogers - as with many I made the switch - and while my actual phone service is improved I'm starting to see the same disregard for customer service.

A contract is one thing, but if you're stuck in a contract paying for a service that doesn't work as intended.... the contract should be voidable.

I'm unsure as to the specifics of this case, but it seems that most telcos are happy to let customers rot once they're stuck in a contract.

Best News I have heard all day (1)

Rayeth (1335201) | more than 5 years ago | (#24420001)

This is great news. I never understood why telcos decided to charge all these fees in the first place. Couldn't they get rid of them and just increase the cost of their plans? Since they claim they need them that seems like the way to do it. Why sneak all your revenue in by shady practices? Too bad they will likely appeal the ruling and nothing will be decided for years will this is tangled up in court.

Re:Best News I have heard all day (3, Insightful)

alen (225700) | more than 5 years ago | (#24420141)

because this is america and people only make decisions on the number they see. you can charge more but then someone will charge less and have a termination fee and this company will get all the business because everyone will say they are cheaper and go with them

Re:Best News I have heard all day (1)

jellomizer (103300) | more than 5 years ago | (#24420475)

The great American Sin, buy something not at the cheapest price available and not worrying about the long term costs.

Judge Rules Signed Contracts Are Unenforceable (4, Insightful)

Mesa MIke (1193721) | more than 5 years ago | (#24420011)

Surely EULAs are even less enforceable than signed contracts?

Re:Judge Rules Signed Contracts Are Unenforceable (2, Informative)

b96miata (620163) | more than 5 years ago | (#24420305)

More disturbing to me is the fact that he overruled a jury.

From TFA:
" On June 12, a jury in the Alameda County lawsuit ruled in favor of Sprint Nextel, determining that its customers who canceled their service early had breached their contracts with the company and that early termination fees were warranted.

But in overruling that decision, Sabraw said the jurors appear to have erred in assuming the fees were valid, and she took issue with the way Sprint Nextel determined that its customers owed the fees."

Re:Judge Rules Signed Contracts Are Unenforceable (3, Insightful)

Anonymous Cowpat (788193) | more than 5 years ago | (#24420525)

I'd be more disturbed if the judge didn't have the power to overule a jury when they're wrong.

The argument is that the jury made a decision that the contract was breached, given that the fees clause was valid.

The judge has now ruled, as a matter of law, that the fees clause was not valid, which makes the jury's judgement of the facts at best irrelevant. Presumably there is now no fact to be tried by a jury - the part of the contract that the customers have supposedly breached is invalid, therefore no breach could have occured, therefore no fees.

Re:Judge Rules Signed Contracts Are Unenforceable (3, Insightful)

hyperz69 (1226464) | more than 5 years ago | (#24420779)

I guess Jury Nullification is dead... Long live Judicial Nullification.

Re:Judge Rules Signed Contracts Are Unenforceable (0)

Anonymous Coward | more than 5 years ago | (#24421093)

More disturbing to me is the fact that he overruled a jury.

Even more disturbing to me is that you could not tell the difference between a he or a she. Wait, this is /., my bad.

Re:Judge Rules Signed Contracts Are Unenforceable (1)

DragonWriter (970822) | more than 5 years ago | (#24421201)

More disturbing to me is the fact that he overruled a jury.

What's disturbing about that? In the US system, the judge is the trier of law. Where there is jury (which there is not in all cases) the jury is the trier of fact. A judge throwing out a jury verdict as inconsistent with the law is really no different than if the judge did not do so but an appeals court did, but no one seems to find the fact that we have an appeals system in addition to trial courts to be a misfeature of our judicial system.

Re:Judge Rules Signed Contracts Are Unenforceable (1)

Toandeaf (1014715) | more than 5 years ago | (#24421237)

Umm... you seem to be implying that all signed contracts are invalid. You are taking this ruling as way more far reaching than it actually is.

Bad News (3, Interesting)

LBArrettAnderson (655246) | more than 5 years ago | (#24420069)

I hope that I read that wrong. You can get good deals by entering a long term agreement. I pay about $30 less per month for my collocation because I have a 2-year agreement. Are you saying that I should be able to pull out after a month and not have to pay anything? Even if my setup fee was waived because of the deal? That sounds unfair to the providers and if this continues it will result in higher prices for everyone.

Re:Bad News (1)

wizardforce (1005805) | more than 5 years ago | (#24420395)

that's certainly a good point, on the other hand why would someone choose to leave the plan at all if it were better than the competition?

Re:Bad News (5, Interesting)

Solandri (704621) | more than 5 years ago | (#24420537)

I hope that I read that wrong. You can get good deals by entering a long term agreement. I pay about $30 less per month for my collocation because I have a 2-year agreement. Are you saying that I should be able to pull out after a month and not have to pay anything? Even if my setup fee was waived because of the deal? That sounds unfair to the providers and if this continues it will result in higher prices for everyone.

You have it backwards. You aren't paying $30 less per month for being in a 2-year contract. People who aren't in a contract or who bought their own phones full price are paying $30 per month too much. The phone companies set up a pricing structure which included prorated charges and termination fees for subsidized phones, but didn't remove those charges for people whose phones weren't being subsidized. If I paid for my phone up-front or it's paid off, why should I be forced into a contract to get lower rates or be charged an early termination fee?

The way it should work is there should be a base monthly fee for phone service and only phone service. If you want the phone company to give you a phone for a no-money-down (or $50-$100 down), then it should be structured as a loan and added on to your bill. If you end your service before the loan is repaid, you're on the hook for the balance of the loan - that's your termination fee. Those of us with old or fully paid for phones shouldn't be paying extra just because the phone company's pricing structure assumes everyone's phone is subsidized.

Re:Bad News (3, Insightful)

Galactic Dominator (944134) | more than 5 years ago | (#24420571)

Nope that's not what is being said. They said the cell phone companies were screwing customers and that the termination fee didn't accurately reflect the cost of a broken contract.

The ruling was in favor of the class action plaintiffs because cell phone companies have operated in collusion in regard to early termination fees. Whether that collusion was orchestrated, or merely a in indirectly agreed upon measure to weasel more money from clients, the result is the same.

Re:Bad News (1)

mc900ftjesus (671151) | more than 5 years ago | (#24420623)

That's the problem, they force you into a contract to get better rates. The contract should only be for handset subsidy not the only way to get a good plan.

Re:Bad News (0)

BigAssRat (724675) | more than 5 years ago | (#24420799)

BULLSHIT!! I have NEVER been FORCED into ANY cell phone contract by ANY provider. I have chosen NOT to get a cell phone for a number of reasons. That CHOICE is STILL THERE for EVERYONE! Don't use the word FORCED unless a gun was pointed at your head and you were told you would be killed unless you signed the contract. Otherwise, you signed the contract, you should live by the terms. If you chose NOT to read the 10 pages contract, then shame on you.

Re:Bad News (1)

pembo13 (770295) | more than 5 years ago | (#24420651)

It will only result in higher prices because they now have a new excuse to charge more, not because its going to cost them more. Why should I have to pay to stop paying, especially when there seem to be few alternatives.

Re:Bad News (0)

Anonymous Coward | more than 5 years ago | (#24420683)

Even if it doesn't continue, the fear is still there that it could continue.

Every phone contract I've ever signed has had the early termination fee clearly spelled out, and I knew exactly what I was getting into.

But I think this is bigger than just early termination fees. The government just interfered in a contractual agreement between two private parties. This sets a dangerous precedent. Does this mean they can interfere with other types of contracts? If they can reduce or eliminate a fee, couldn't they also increase or add more fees?

Re:Bad News (0)

Anonymous Coward | more than 5 years ago | (#24421183)

I think, in essence, that is what a lot of people are saying, though I don't think people are looking to not pay anything, but rather pay a prorated termination fee.

And really? I don't disagree with this. Sometimes you choose a shitty network for your area and you get screwed. Sometimes you move and your network becomes shitty. In any event, why should I have to stick with someone who provides bad service?

I don't get it (1)

Khashishi (775369) | more than 5 years ago | (#24420299)

What exactly are the charges? Did Sprint Nextel not describe the early termination fees in their contracts? Why would an early termination fee be illegal?

Is this s precedent in Canada too? (1)

bogaboga (793279) | more than 5 years ago | (#24420377)

Since Sprint operates in Canada, I wonder whether this can be taken as precedent in Canada as well. I'd be glad if it did.

Re:Is this s precedent in Canada too? (0, Troll)

Daimanta (1140543) | more than 5 years ago | (#24420503)

Well, Americans may believe that they rule the world and their law applies everywhere else, but this isn't actually true.

Re:Is this s precedent in Canada too? (2, Interesting)

damn_registrars (1103043) | more than 5 years ago | (#24420573)

Since Sprint operates in Canada, I wonder whether this can be taken as precedent in Canada as well. I'd be glad if it did.

I guess we always figured that our companies down here, even if they operate elsewhere under the same name, tended to dish out exclusive abuses to those of us living here. Apologies if you are subjected to the same level of customer dis-service that passes as normal here.

I recall previous discussions where European cell customers were astonished that we still pay to receive calls (and text messages) here in the states.

Key Legal Principles: (5, Informative)

sampson7 (536545) | more than 5 years ago | (#24420399)

Two very interesting things about this decision. First, the Judge appears to have over-ruled the factual findings made by the jury -- a fairly unusual practice, and one that is not likely to be upheld on appeal. Second, the Judge appears to have returned to "first principles" of contract law in reacher her decision -- good for her. We need more of this type of rational thinking.

There are two key points in the article (couldn't the actual opinion) hitting these points:

On June 12, a jury in the Alameda County lawsuit ruled in favor of Sprint Nextel, determining that its customers who canceled their service early had breached their contracts with the company and that early termination fees were warranted.

But in overruling that decision, Sabraw said the jurors appear to have erred in assuming the fees were valid, and she took issue with the way Sprint Nextel determined that its customers owed the fees.

Interesting; because judges are usually very reluctant to over-ride decisions made by juries. Generally, juries make findings of fact and the Judge makes the finding of law. Here, the Judge said that the Jury clearly erred in finding the contracts valid. Which makes me think that the Jury instructions were extremely poorly written, or that the Judge feels very strongly that the plaintiffs made the legal side of their case so well that "no reasonable jury" would have returned the decision that it did. (Also, I note that the Jury appears to have awarded damages despite finding that the contracts were valid -- this semi-contradictory result may have persuaded the judge to go in the direction she did.)

The second interesting argument:

"Sprint did no damage analysis that considered the lost revenue from contracts, the avoidable costs and Sprint's expected lost profits from contract terminations," she said.

YES! It is a founding principle of contract law that the non-breaching party's damage recovery is limited to its actual losses and its cost to make up the breaching party's violation of the agreement. Traditionally, a contract that agreed to damages in excess of the non-breaching party's actual exposure (i.e., punative damages) were ruled invalid and "reformed" by the court into something reasonable.

However, the courts over the past few decades have been relunctant to follow this principle -- instead, most consumer contracts today contain a "liquidated damages" clause, where the parties agree ahead of time on an estimate of what the actual damages would be. To me, fundamental principles of contract law dictate that an agreement to excessive liquidated damages clauses (particularly in consumer contracts) should not be upheld. I'm glad to see a court finally moving in that direction.

Re:Key Legal Principles: (2, Insightful)

Sockatume (732728) | more than 5 years ago | (#24420933)

That actually sounds very equitable. If phone companies switched to a more reasonable termination penalty, perhaps pro-rata fee where you basically bought out your subsidised phone (which is an outstanding debt you owe to the company) then this decision would not affect them.

Re:Key Legal Principles: (2, Interesting)

Sockatume (732728) | more than 5 years ago | (#24420981)

I should say, if Sprint switched to a more reasonable termination penalty - it sounds like others are more reasonable and may not be affected by this particular decision.

what about termination fees.. (1)

mattsqz (1074613) | more than 5 years ago | (#24420565)

..from late 2006/early 2007? sprint had, for two months in a row, charged me double on every item on my bill, and even billed me per-kb for data usage while at the same time charging me the unlimited usage fee i had agreed to(the bills were well over $300 for a month of service - you see, i was also being charged per minute even though i had a 1000 minute/mo plan). after two months and many hours on the phone arguing that this was their mistake and i should not have to pay them these outrageous fees, i simply stopped paying the bill. next thing i know, they're after me for the remainder of the 2-year contract (!!!) plus early termination fees. which i promptly ignored. havent heard from the collection agency lately...but i will never give sprint a dime and neither will any of my friends/family.

Direct TV? (1)

D66 (452265) | more than 5 years ago | (#24420761)

Will this apply to other service providers?
Will I be able to walk away from my Direct TV Contract?

Expansion? (1)

thedistrict (1327685) | more than 5 years ago | (#24420911)

It will be interesting to see how and if this carries over to otehr carriers. For them it sets a dangerous precedent, but it's great for consumers. It's bordering on creation of monopoly, only thing is they all do it to ensure their customer base.

Changes in service terms. (2, Informative)

sidragon.net (1238654) | more than 5 years ago | (#24420929)

Sprint, very frequently, changed rates for various services under the contract. Contract law in most states allows one party to terminate the agreement without penalty when the other imposes material changes. In this situation, they have been known to lie [consumerist.com], which I experienced personally (specifically regarding their text message rate hikes). Glad to see both the market and now the courts punishing them for this ridiculous behavior.

Lifting by the boot straps? (3, Interesting)

scorp1us (235526) | more than 5 years ago | (#24420989)

Whether Sabraw's ruling will stand isn't clear. Experts say an appeal is likely, and the Federal Communications Commission is considering imposing a rule - backed by the wireless industry - which might decree that only federal authorities can regulate early termination fees.

Sorry, Charley, Tenth Amendment says no:
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

You just can't make jurisdiction up, but they certainly do try. They'll try to call it "interstate commerce", even though that provision was meant to keep the interstate commerce unimpeded, and not to be a source of power grabs.

Contract? Court Review? (1)

cdrguru (88047) | more than 5 years ago | (#24421129)

So, does this mean that any contract could potentially be reviewed by a court and parts of it thrown out? After the fact? In some cases, long after the contract was terminated?

This seems a little uncomfortable to me. It sounds like the judge decided the fees weren't valid and that he decided Sprint didn't justify the fees in terms of actual monetary losses. I know lots of fees for non-compliance that aren't based in any way on monetary losses - the fee exists as a penalty.

I suppose I could see a judge ruling that the cell phone carrier service agreement contract was invalid and new customers could not be signed up until it was revised. But changing the terms of a terminated contract sounds a little fishy. And it does not seem like a good idea in terms of contract law in general.

So, are CD penalties to be thrown out next? Aren't they just as unfair? How about traffic tickets? What monetary loss is represented by a $200 speeding ticket? And besides, where was the contract that I signed that made me agree to pay the $200 fine anyway?

Re:Contract? Court Review? (2, Informative)

DragonWriter (970822) | more than 5 years ago | (#24421253)

So, does this mean that any contract could potentially be reviewed by a court and parts of it thrown out?

This ruling is a product of the fact that this has been a feature of contract law in this country since before this was a country, yes. It doesn't "mean" that in the sense that suddenly now that will become the case where it hadn't been before.

About damn time (2, Interesting)

Radical Moderate (563286) | more than 5 years ago | (#24421147)

I got into a battle with Verizon over termination fees years ago. After getting raped for going over the minutes in my plan, I opened an account with another carrier and moved my number. When Verizon tried to charge me for early termination, I explained that I had moved my number to a new carrier, which the courts had recently ruled was a consumer's right, but I would be happy to continue paying the monthly fee for my Verizon account ( I had a couple months left on my plan), and they could assign me a new number if they wanted to, although I wouldn't be using it.

They said it didn't work that way and I had to pay termination fees. I had three phones, and the termination charge was about $300 per phone. After about 6 months of harassment and threats they finally gave up. I'll never give those losers another dime.
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