California Judge Rules Early Cell Phone Termination Fees Illegal

According to Yahoo! a Superior Court Judge in California has ruled that the practice of charging consumers a fee for ending their cell phone contract early is illegal and violates state law.

The preliminary judgment orders Sprint Nextel to pay customers $18.2 million in reimbursements and, more importantly, orders Sprint to stop trying to collect another $54.7 million from California customers, (roughly 2 million), who have canceled their contracts but failed to pay the termination fee.

An appeal is inevitable, but this new ruling could have massive fallout throughout the entire industry. Cellular companies can no longer threaten their customers with early termination fees. Now they lose the power to lock customers into contracts for multiple years at at time. The reason why companies are able to lock in cheap hardware is because of the two-year long contracts. What does this mean?  It could mean phones may get super expensive. Say goodbye to the $199 iPhone.

“Of course, the carriers aren’t going to take this lying down. Early termination fees are seen as critical to business, so carriers are expected to look for ways to reclassify the fees (such as by calling them ‘rates,’ part of the arcane set of laws that covers the telecommunications industry). The industry is also pushing for the federal government to step in and claim oversight over the early termination fee issue, which would invalidate any state ruling. The FCC is generally more tolerant of such fees, though Chairman Kevin Martin has proposed a plan whereby the fees are decreased the closer you are to the end of your contract.”

“The FCC may also buy the argument that, since carriers are nationally based (and consumers can use their phones anywhere in the country), that a single policy should apply across the nation, rather than creating a patchwork of legislation that could lead to confusion and chaos caused by having 50 different policies.”

The end of early termination fees could be around the corner, but it’s not quite there yet.

IF in case, the court ruling gets appealed, here are other ways to get out of your Sprint Contract:

Terminate Your Sprint Contract With Out Early Termination Fee

Cancel Sprint Without Early Termination Fee Over Roaming Rate Change

Sprint is going down….

Are you stoked or what?

-Austin Chu