AT&T Pays $18M to Settle ETF Dispute

Source: AP

AT&T pays up to settle the claims of customers bothered by early termination fees.

AT&T Inc. is paying $18 million to settle claims that it imposed unfairly high fees on wireless customers who wanted to end their contracts.

The settlement covers customers from as far back as 1998. Those who were charged an early termination fee, or ETF, could get as much as $140 back, if they canceled a two-year contract just before it was about to expire. Those who canceled earlier would get less.

Those who were never charged an early termination fee can get an AT&T long distance phone card with up to 200 minutes, or if they have a AT&T contract, choose to have the ETF changed from a $175 flat rate to one that is prorated.

AT&T used to charge an ETF of $175, regardless of how long the customer had left on the contract. Like other carriers, it started prorating the fee in 2008, so customers canceling after a year of service paid less.

Early termination fees recover some of the subsidies that carriers pay to reduce the price consumers pay for new phones. But in several suits AT&T and other carriers faced around the country, customers claimed the fees were illegal because they bore no relation to the carrier’s actual costs, and discouraged customers from switching carriers. The consumers also complained that carriers would extend the contract periods, sometimes secretly, when customers asked to change minor provisions in their contracts.

Dallas-based AT&T said it “strongly” denies any wrongdoing, and said no court had found it at fault. It’s settling to avoid further litigation, it said.

Sprint Nextel Corp. settled similar claims in August for $17.5 million.

On Tuesday, the Federal Communications Commission sent letters to AT&T, Sprint, Verizon Communications Inc., T-Mobile USA Inc. and Google Inc., asking whether they give customers adequate notice about ETFs.

Showing 4 comments

Sprint raises early termination fee to $350 (Digital Trends) | News Bulletins at 6:12pm 31st August 2011 [...] a discounted phone and canceling the service before the company makes its money back. Or in some cases companies use ETFs to charge customers more money than is due. All cell phone companies have ETFs, [...]
Sprint Raise Early Termination Fee (ETF) at 5:41pm 31st August 2011 [...] a discounted phone and canceling the service before the company makes its money back. Or in some cases companies use ETFs to charge customers more money than is due. All cell phone companies have ETFs, [...]
R Govil at 9:48am 4th October 2010 They are still doing it. We changed our service but had less than a week in our contract left, believing we are paying them for full 2 year term ( and we didn't remember the end date) the switch was made. I called AT&T and a nice rep told me all is well. There are no dues. I got a letter from AT&T on Friday saying we need to pay $240 in ETF! For three months AT&T has been offering new phones and we thought our contract with them was over. Phone Transfer process doesn't flag this issue. AT&T helding the line "You broke your contract!". The fact that I am paying for full two years of the contract had no effect. Can they force me to use their services? Well this behavior will just mean they will be shutout of future deals at my house. i.e. A cool $3600/year that AT&T could have made from me. I bet there will be more people with this gripe. I will also pursue all options through FCC and CPUC. This is still America where the system works and predatory practices like these do not work in the long run!
dang at 7:33pm 27th January 2010 I just paid an early termination fee for a 3g card for my laptop, but only paid $50 since they saw I never used it. I was happy with that.