AT&T to pro-rate early termination fees for cell-phone contracts

In another sign of the growing consumer power in the cell phone marketplace that we reported last January, AT&T has joined Verizon in pro-rating its $175 early termination fee, a major thorn in the side of respondents to our latest survey of cellular service providers (available to subscribers).

But three other big wireless service providers, Alltel, T-Mobile, and Sprint, have yet to deliver on their promises to do likewise this year. Those providers still ding you for up to $200 if you cancel your cell phone contract before its full term is up. Consumer advocates including Consumers Union, Consumer Reports' parent organization, consider such flat fees to be unjustified, since consumers continually repay the cost of a low-priced or "free" cell phone with a portion of their bill each month.

AT&T's plan is similar to Verizon's. For both, there is no cancellation fee for the 30-day trial period at the beginning of a new cell phone contract, during which new customers can quit the service if they're dissatisfied. Thereafter, the $175 fee on one- and two-year contracts is reduced by $5 for each month you stay with the service.

Verizon began pro-rating its cancellation fees in November 2006. AT&T will commence pro-rating for new and renewal customers on May 25. That means, if you're thinking about switching to AT&T or renewing your contract to get an updated, discounted phone, you should try to wait to do so until May 25. Contracts signed before then—and, of course, existing older contracts that have not yet run their full term—will still be subject to the flat $175 cancellation fee.

Spokespeople from the three major cellcos that are yet to implement pro-rating were vague when we called them to inquire about timing. "All I can say is it's in the process," said Scott Morris, an Alltel spokesman. Sprint blamed a new customer-billing platform, which is expected to be in place at the end of June. "Once we do that, we'll implement pro-rating," said Roni Singleton. T-Mobile's response was to repeat its less-than-specific November 2007 press release, which promised only that early termination fees "will decline during the course of a customer's contract term with T-Mobile."

Sen. Amy Klobuchar, D-Minn., calls the AT&T announcement "a welcome but long overdue step." Last year, she introduced federal legislation that would have required pro-rated fees, among other fairness protections for consumers. Now Klobuchar wants the sluggish cell companies to follow through or explain why they're not going to do it. "It is time for the wireless companies to adhere to the assurances they made to the American consumer," she said.

—Jeff Blyskal

Comments

[Laura]

We have been with AT&T through all of their name changes and such since 1999. Until recently we really hadn't been too worried about making any real changes to our account. When we were eligible we upgraded for the new free phone, when our children were old enough we added lines so they would have phones. Now after all these yrs and all the money we have funneled into their company we found a program where you can get new NICE phones free but the catch is we have to cancel our contract and start a new one, STILL WITH AT&T. So I called AT&T and we are eligible for upgrades but can't get these phones for less than $128 each. I asked if we could get out of this contract so we could start a new one since we are only 3 months from the end of this contract and she said no. When I mentioned the lawsuit and that AT&T was supposed to have started the prorating she said they don't do that. She had never heard of this ruling and as far as she knew they always upheld the ETF, no matter how close you are to the end of your contract or how many yrs you have been a good customer. Then she told me that our phones were a separate contract from our childrens! How is that even possible??? It's all on the same bill and they were the added lines for $9.99. Then she proceeded to try to get me to do another UPGRADE!! ON ALL 4 LINES!! Which of course would tie me into another 2 yr contract with crappy little phones. We have to stay with AT&T for the time being but that will definitely be up for discussion when our contract is up.

[Jabels]

Nope ATT has the worst service ever. They don't prorate anything infact the customer service rep told me that they don't prorate charges. Looks like theres confusion from the top-down in management and in its practices.

[Paul Eng]

To Simson Garfinkle:

As we said in the post above:

"AT&T will commence pro-rating for new and renewal customers on May 25."

Since you said you canceled "after 18 months," that means your plan began PRIOR to May 25 (2008) and it would NOT be eligible for pro-rating.

--Paul Eng
Web Senior Editor, Electronics

[Simson Garfinkel]

We just canceled an iPhone after 18 months and were charged $175 early termination fee. AT&T is NOT pro-rating its early termination fees.

[Sharron]

I was an ATT customer for 4 years and accidentally ended my contract a month early. They charged me the full $175 per line and when I called about the monthly discount I read about in the Consumer Reports magazine, they said that it was only for brand new customers, that was as of December 11th. No grandfathering in existing customers whatsoever. Very disappointing.

[Lisette Arsuaga]

I have been an AT&T customer for over ten years for my cell phone service and over twenty years for my three land lines. FOr the last four months I have spoken to at least 50 customer service representatives; I've been passed on in one single phone call to at least five people; I have been on the phone in many of these calls for over one hour. All to clear a mistake made on their behalf. Although I was told repeatedly that the issue had been resolved, I was forced to call back when it hadn't - worse yet, they cut my phone service twice for failure to pay the amount I never owed in the first place! Today after speaking to three customer service representatives I cancelled my service, only to be told I would have to pay $175 per line (that's x3) for early termination. How is it that they have the right to not provide service and yet I am still forced to do business with them or be penalized? These fees are ridiculous and it's time cell phone companies stop taking advantage of their loyal customers.

[Rand]

I have just been told that ATT will charge $175 for each phone if I cancel early.One phone has only 2 months left the other has 8 months left. This is a lie they are not pro rating anything.I found a provider that has much better reception in the area I live.Being disabled I need a dependable service.Each time I renew my ATT contract I was told they were the only one covering my areas.Which was another lie.I will never buy anything again that has ATT on it.

[Jessica]

I'm currently living a nightmare with AT&T. They are charging me $175 early termination fee for two phones. I have been a faithful customer since 2003. I was sent to collections and paid the full amount owed and still had a remaining due of $350 FOR EARLY TERMINATION FEES. I was told by a rep. at the collections agency that the remaing amount would be defaulted because att failded to include it with the collection agency. I must also add I had to go through 3 customer service reps. at ATT and it was about 1 hour and 15min. Most of that time I was on hold. Now I'm playing the waiting game my case is being reviewed by ATT.
I DO NOT RECCOMEND AT&T, DO NOT DO BUSINESS WITH THEM.

[Jolene]

I absolutely have had nothing but trouble with AT&T! And every other wireless provider has 24hour customer service! They have messed up my bills, charged me for things I haven't used, and just made things all around difficult! I have been a customer for over 3 years... and I am sooo dissapointed that things aren't getting any better! They ridiculously expensive, and I am not even will to ride out my contract! I am also not too happy to pay $400 to shut off my service when the problem is not me, but them! I DO NOT RECOMEND AT&T/CINGULAR to ANYONE! Sprint is good for business because of the two way, I don't know much about verizon, but tmobile is the most reasonable priced one, great customer service, and have good coverage area.

[John Simmons]

The question I have is if the cost of the phone is included in the monthly fee that I pay over the term of my 2-yr contract, why doesn't my monthly charge decrease after the two years have expired and I no longer have a contract? Seems to me I should be getting some sort of discount after my contract is up. After all my phone is now paid for.

[Justin W Banner]

AT&t has contacted a collection agency for over $200 dollers in cancelation fees that I refused to pay for canceling 2 days before my contract was up. will this affect my credit card interest rates? I was missled when I got the phone I asked for a 1 year contract and they sliped me a 2 year and sent me out the door. I have a copy of the contract and I never even signed it

[Laura Yanez]

Just got off with AT&T Customer Service Rep. told me that the full $175 was going to have to be paid although my contract was almost half over. A contract I never signed but was electronically applied since I kept the phone.

I tried my best to stay with AT&T but their rates for adding another phone and getting a Bluetooth compatible made it impossible! I went with Verizon and got new equipment etc. for about half. Phones ended up almost free.

Customer service didn't even offer to prorate. Told me to write to the Office of the President then told me a P.O. Box in Atwater, CA Ha! no way the President is in Atwater, CA.

Would love to leave all of AT&T online services and home phone service just because they've proven that they have deep disdain for their customers.

[Craig Hattersley]

After two years on a Verizon family plan (700 minutes a month for $100), we moved to T-Mobile, as we were using fewer than 100 minutes and wanted the most economical pay-as-you-go plan. As it turns out, we switched over FOUR days early (we wanted to ensure retaining our same phone numbers), and as a result, Verizon is now after us for $612.60 in early termination fees -- despite the fact that we have paid off the entire two years of the original contract. Their corporate actions belie the claim that these ETFs are justified to recoup the cost of the handsets, violating the spirit, if not the last letter, of their rationale.

[Tyler]

Someone not liking AT&T's terms is free to go with Sprint, Verizon or any other wireless carriers.

[Ivonne Garcia]

So to say that Me and my husband been with you for to long and my girls too as hope that you can give us a better deal and bill wise, as a customer and other we such have a better deal as other and hope that you can be better poeple and with your customer who been with you long time i don't like the feeling of takeing adanveage of thank you very much, so help those who pay, you have a great day too.. I HAVE BOUGHT 2 OTHER PHONES ON TOP OF THAT AND STILL PAYING MORE THEN I WANTED TOO AND HOPE THAT YOU CAN HELP ME WITH YOU WITH ONE THAT DON'T WORK AND SEND IT BACK 2 TIME ALREADY SO WHAT CAN YOU CO FOR ME NOW. I HOPE THAT YOU CAN HELP ME AS A SINGLE PATRENT NOW THAT I FELT ME HUSDAND SO CAN YOU HELP ME NOW THAT IM IN A SINGLE PAREN. PLZ LET ME NOW IF YOU CAN I REALLY HOPE SO AS A CUSTOMER.. I WAS REALLY DISSPONETED OF MY BILL ON HOW MUCH I HAVE TO PAY EVERY MONTH I HOPE THAT YOU CAN HELP ME WITH THIS AND GETTING A PHONE.

[Mike]

I am also surprised there is no prorating for people who had prior contracts? There is no loyalty anymore to long term customers. 8 year custumer to US Cellular, moved to an area that our phones did not work well, but Razr's did. Went to US Celullar (was in the middle of a 2 year contract) and told them my story, asked for a discount on new phones, some help only. They said I could pay full retail or sign up for an additional 2 years, making it 3 years till I was out of the contract.

It was cheaper for me to buy out the contract and start a new one with T-mobile! When I told US Cellular this they said basically oh well we can't help you! 8 years we had phones through them and they would not budge a bit!

wow, I am surprised you did not give them a hard time for not releasing 60+ million consumers from that unfair provision...only new customers? No loyalty to customers who have been with them for years...