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Verizon Wireless may have to refund up to $1 billion for “illegal ETF”

By: , IntoMobile
Thursday, January 31st, 2008 at 5:34 PM

Verizon Wireless lawsuit could cost $1 billion in refunded ETFWe all hate Early Termination Fees (ETF), that much is undisputed. What is disputed is just how legal it was to charge 70 million of its former customers an ETF.

Well, former Verizon Wireless subscribers that got burned with an ETF will be happy to hear that an arbitrator has cleared the way for a class-action lawsuit to go to trial. The potential damages to Verizon Wireless’s accounting-books could amount to $1 billion – much of which will be used to refund unfairly charged former-customers.

The question at hand is “whether the $175 early termination fee imposed by respondents Cellco Partnership d/b/a Verizon Wireless … is based upon an unenforceable liquidated damage clause.” In other words, the Plaintiffs are betting that Verizon Wireless had no legal grounds to charge them an Early Termination Fee.

On the one hand, ETFs prevent massive customer defections, helps curb a network operator’s volatility in subscriber-base counts, and allows the subscriber to deeply subsidize new handset purchases (like when you get a phone for free after signing a two-year contract). This keeps costs down and works to the benefit of all cutomers involved. On the other hand, ETFs, until recently, required subscribers to pay the full penalty regardless of the remaining contract length. If you canceled your contract just a week before it was expired, Verizon Wireless would make you pay the full amount – and it seems that is the issue at hand here.

We’ll be keeping a close eye on this one, folks. This could set a precedent that could turn ugly.

[Via: RCRNews]

About The Author

Will Park

Will hails from The City of Angels - Los Angeles, California. He spends his time playing with his numerous gadgets and looking forward to seeing what future holds for mobile technology. An avid promoter of a fully "digital" life, he promotes the widespread adoption of truly mobile, paper-less living. He dreams of the day when he can go completely digital. No more snail mail, paper receipts, bound books, notepads/spiral notebooks, credit cards, hard currency. He's a digital warrior - fighting for the converged life. He is an idealist and a realist - he has a perfect view of what the world should be but knows that the world is not perfect. Can we ever hope to see Will's dream become reality? We'll see...

  • MicahH

    Wow, that would be quite a brick in the face of Verizon. While I don’t really like ETF’s, this will really hurt an otherwise good company. I hope they settle for a lot less.

  • enough is enough

    Where do we sign up for the class action suit? Please provide a link or articles

  • TVman

    Many times they knew it’s wrong or unfair, but they did it anyway, hoping no one catches the problem or dare to face the big corporation with loads of money they got (from unethical pratices). This action is usually decided by a slimy, shady character in the corner office.

    I’d say make them payback what they took, plus a hefty punity fine so they will think ten times before trying to cheat customers next time. This could be proven as federal grand theft, then throw the highly paid slimy shady character in the slammer for a long time.

    Competition is tough, but if you can’t take the heat, get out the kitchen. Don’t make excuses to go ripping off customers