We 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]