Sprint's Early Termination Fees Under Fire

ByABC News
November 6, 2008, 10:17 AM

— -- Sprint is getting hit with another lawsuit over its Early Termination Fees (ETFs). Attorney Scott Bursor, fresh off a provisional victory against Sprint in California, has launched a $1.2 billion suit against the wireless carrier for ETFs charged to customers since 1999. The suit asserts that ETFs violate laws in all 50 states and the Federal Communications Act. ETFs usually amount to anywhere from $150-200 for every phone line cancelled before the end of a contract.

In July, a California state judge ordered Sprint to pay $18.2 million in ETFs and to stop pursuing another $54.7 million that customers had refused to pay. Despite the positive outcome the ruling was preliminary and may yet be overturned. Today, Judge Bonnie Sabraw of the Alameda County, Calif., Superior Court will hear arguments from both sides and a final ruling on the California case is expected in the next 90 days.

ETFs have become a point of contention recently as both lawmakers and wireless carriers seek to avoid litigation. In May, news broke that the government was considering plans to control ETFs with a limited time offer to break your contract and a pro-rated schedule to reduce the fee as the contract goes on. This summer, Sprint was caught in a public relations nightmare when an internal memo was discovered which "acknowledged that 'the government will never, never accept such penalty amounts,' regarding early-termination fees enforced when canceling a cell phone contract early." And just last week, Sprint launched a self-imposed pro-rated ETF reduction plan. Under the new policy ETFs will go down by $10 per month after month six of a new contract. The plan went into effect as of November 2, 2008, but applies only to new contracts that start on or after November 2.

Carriers argue that ETFs are necessary to recoup any losses they may incur from keeping costs so low on new handsets. It is estimated for example, that AT&T subsidizes Apple's iPhone as much as $425 for every 2-year contract. Bursor challenges that assertion, and believes that ETFs violate the law.