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Plan to cut cellphone contract cancellation fees draws criticism

May 22, 2008|From the Associated Press

WASHINGTON — A proposal for the government to help cellphone customers avoid expensive fees when they cancel contracts with wireless companies might go down in flames after consumer advocates protested Wednesday that it wasn't generous enough.

Cellphone companies routinely charge customers $175 or more for quitting their service early. Under a proposal to the Federal Communications Commission, the wireless industry offered to give consumers the opportunity to cancel service without any penalty for up to 30 days after they sign a cellphone contract or 10 days after they receive their first bill, among other provisions.

In exchange for the government's approval, the agreement would let cellphone 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.

The proposal would require companies to reduce fees month by month over the course of a contract based on how long customers have left, according to people familiar with the offer who spoke on condition of anonymity because the FCC has not accepted it.

It would not abolish cancellation fees and would not refund such fees to anyone who had already paid them.

Consumer advocates warned Wednesday that the industry's offer wasn't good enough.

"If this plan goes through, the nation's largest cellphone carriers get a get-out-of-court-free card," said Chris Murray, senior counsel for Consumers Union, the nonprofit publisher of Consumer Reports magazine. "We have long opposed limiting consumers' rights to sue, and that seems to be what we're doing here."

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 in consultation with other leading wireless companies, whose executives indicated they would not oppose its provisions, people familiar with the offer said.

The FCC has declined to comment on the proposal.

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