WASHINGTON - The government is quietly negotiating to help cell phone customers avoid expensive fees when they cancel contracts with wireless companies, the Associated Press has learned.
Cell phone companies routinely charge customers $175 or more for quitting their service early. Under a proposal to the Federal Communications Commission, the wireless industry would give consumers the opportunity to cancel service without any penalty for up to 30 days after they sign a cell phone contract or until 10 days after they receive their first bill.
The proposal would also cap such fees and reduce them month by month over the course of a contract based on how long customers have left, according to people familiar with the offer speaking on condition of anonymity because the FCC has not accepted it. The plan would not abolish cancellation entirely and would not refund such fees to anyone who has already paid them.
In exchange for the government's approval, the agreement would let cell phone companies off the hook in state courts where they are being sued for billions of dollars by angry customers. If approved by the FCC, the proposal also would take away the authority of states to regulate the charges, known as early-termination fees.
Lawyers representing customers who are suing over the fees strongly oppose the deal.
"It's Christmas in May for the companies," said Pamela Gilbert, a lawyer with Cuneo Gilbert & LaDuca, a Washington law firm working on one of the class-action lawsuits against the industry. She said if the FCC agreed to the proposal, it would save cell phone companies hundreds of millions of dollars.
"The people left holding the bag are the millions of people who paid illegal ETFs [early termination fees] and now will never get their money back," she said.
The nation's No. 2 wireless company, Verizon Wireless, offered the proposal to the FCC for its review after high-level meetings with senior FCC officials. It did so after consultation with other leading wireless companies, whose executives indicated they would not oppose its provisions, people familiar with the offer told the AP.
The FCC declined to comment.
Consumers who have paid such fees describe them as exorbitant.
"It's ridiculous," said Ric Causey of Allen, Texas, who paid $600 in termination fees to Sprint on contracts for three cell phones after he canceled service because of what he said was poor reception around Dallas.
"I understand the fine print, but I ended up paying $200 per phone just to switch service," Causey said. He complained to executives to no avail.
Causey, a freelance video producer, said he never considered refusing to pay the fees out of fear it would hurt his credit rating.
Wireless companies said the cancellation fees were necessary to recover the cost of new cell phones, which they subsidize under long-term service contracts, and to defray their costs for signing up new customers. Consumer groups said the fees were unreasonable.