Consumers Irate About Cancellation Fees

Dec. 24, 2009— -- Ardyth Metz doesn't have many warm feelings for DirecTV. First, the country's largest satellite operator installed shoddy equipment at her home, she says, and then it charged her $350 to cancel the contract.

"I went through the roof," she said, when she found out about the hefty early termination fee. Metz, 60, says she was never told about the fee when she signed up for the service and only paid up because she wanted to stop the "nasty" phone calls from DirecTV.

"They harassed me so much I paid it," she said.

Regulators log thousands of complaints each year about early termination fees, making it one of the thorniest topics for consumers, according to government data. Consumer advocates claim that large corporations, including cell phone providers, satellite TV companies and gyms lure customers with attractive introductory rates -- and then slam them with unreasonable penalties when they try to end the relationship.

"Complaints about early termination fees have peaked in the past year," says David Butler, a spokesperson at the Consumers Union. "The level of frustration among consumers is boiling over."

Companies argue that the fees are a fair way to cover the costs of pricey equipment or installations offered to customers at the start of a long-term contract.

"American consumers are used to getting devices at greatly reduced prices, and sometimes, depending on the promotion you get a device for free," said Mark Siegel, a spokesman at AT&T Wireless, which charges customers up to $175 for breaking a contract. "In exchange for a great deal on price we ask customers to enter into a two-year agreement."

Consumer advocates dispute this logic, pointing out that fees often exceed the cost of a new phone. They say the fees simply hold customers hostage.