Verizon loses ETF class action lawsuit, ordered to pay $21 million
By Tim Stevens 
posted July 2nd 2010 11:51AM
posted July 2nd 2010 11:51AM
Congratulations Verizon, you're the latest wireless provider to lose a class-action early termination fee-related lawsuit! It's a dispute that's been circulating in courts since 2008, and while the settlement was agreed upon quickly, there were a few lingering appeals that have taken this long to get cleared up -- and not in VZW's favor. The issue at hand was the company's $175 flat early termination fees, behavior that has proven legally naughty again and again when the same fee is levied regardless of whether you were one month or 20 months into your contract. Each customer named in the suit will receive approximately $87.50 for their troubles, a total of $21 million Verizon will have to pay out. That's a bit more than AT&T got hit with back in January, but a whole heck of a lot less than Sprint's massive $73 million fine.
Only in America
@Exbloder
It's the land of the free!
Except if you buy a smartphone and then cancel your contract, then it costs 350$
@DoctarPeppar
But... didn't you AGREE to that fee? Or was it slapped on afterwards??
@DoctarPeppar yeah I never understood this concept. I would rather pay the relatively cheap cancelation fee in the beginning and not have a contract.
@Exbloder If you can't do the time, don't sign on the dotted line.
@Exbloder Cellphones have only been around since recently (only to explode in the late 90s, early 00's). This ETF lawsuit is simply part of the growing pains of a new market segment. That Verizon is able to close the book on ETF fees with just $21 million, they should be able to ride this wave fine. Their net profit (after taxes) was $3.7 BILLION in 2009.
@okok only Apple Fanboys bought i
rofl, you're obviously not much of a business man.
Their ETF was ridiculous and so is AT&T's new one.
@Almo
Don't you think it's unfair that if you want phone "abc" you are FORCED to agree to a contract with said fee?
Lets see T-Mobile get hit now. They have an even higher ETF, $200 per line. They claim to prorate but they don't really until your contract is almost up anyway. They want to charge my wife the full ETF when she upgraded a cheap flip phone to another cheap flip phone (maybe retails @ $50)
More people need to use cellswapper
@Almo
The ETF is a 'liquidated' damage. Liquidated damages that don't bear a rational or reasonable relationship to the actual damage are punitive. Punative liquidated damages are not allowed in the American system. Basically, because you could breach at day 15 and Verizon loses ~23 months of profits or you could breach at day 699 and Verizon loses 1 month. You still pay the full ETF. This is considered 'unconscionable'.
I guess it's more of a slashdot reply than an Engadget reply... so... That's what she said.
@Almo You agreed to it. But the logic was faulty and the case brought this out.
See they said, as all carriers do, that the ETF is cause they 'loaned' you money for the device. But, you were supposedly paying it off over your contract. So it should go down. So it wasn't really being used as a 'pay off' but rather a 'penalty' and an unfair one.
Although the system is still unfair and not just by Verizon. Cause I can sign a contract and pay (for example) $50 a month for two years on my phone with a $400 subsidy and $400 starting ETF. But divide $400 up into 24 parts and it's like $14, but the ETF only goes down $10 each month. So I'm paying back money I"m not getting credit for having paid
Then lets say that I stick around after the 24 months is up. Not ETF sure. but what about the $14 of the $50 that was the 'payback'. That gets removed right and I just pay the $36 part that was my actual service. No. I continue to pay $50. Same if I bring the phone, fully paid with me.
Something is wrong there also but no one has though to sue over it. And had the connections to do so
Thats why I buy only unlocked and unsubsidised phones. I wonder how anyone can stick with the same phone for 2 years.
@Exbloder Indeed! Here in Brazil all termination fees must be proportional to elapsed-time/contract-time.
From rent contracts, cable tv and cellphones.
@Son Of a Gun Why not? They won didn't they
@Schmid7y i think you just answered your own implied question.
@Charlik To counter this, wireless carriers in the USA should stop subsidizing phones and make the cowsumers pay for them at full price. Then the absence of traditional (blanket) early termination fees can give way to pro-rated fees based on cost for building out network capacity for customers that instead are leaving.
Personally, we are talking about the telephone companies. Considering the first law suit against an American telephone company was more than a century ago, for anyone to trust them now is more of an illustration of folks willing to do business with the devils that they are.
But, on a kinder note, keep in mind that if you cannot beat them, buy their stock and make money from your fellow cowsumers. :)
@Charlik What is unfair? You signed a contract. There ie no argument. You signed a contract. If you didn't want a contract, you also could have signed up for month to month and paid for your phone out right. But no, you signed a 2 year agreement and you are going to complain when you wqnt to break the agreement? I bet you would complain if Verizon (or others) broke their end of the agreement too.
"Rule the air" or else.
@bob1000
thats a lot of happy customers.
@bob1000
BOOM! Headshot.
so this means some lawyer(s) get rich and a few hundred people will be getting $15 checks..
@elijahblake
changes $15 for $87
@elijahblake
Yeah thats what you think. I got a letter that said I was gonna get a check for a ATT Law suite. That was 5 months ago.
Rule the legal fees!!!!!
So does this mean that ETF fees are illegal?
@216 No, just ones that don't get smaller with time.
Amazing. People sign into a contract and then bitch when they get slapped with a penalty for reneging on it. I honestly wish Verizon had won this suit.
@nukee
I believe the issue was that the ETF was not pro-rated and not because people "...bitch when they get slapped...". It only seems fair that it should be.
@nukee VZ lost b/c regardless of when you canceled your contract they would charge you $175. It really isnt fair to charge the customer a flat ETF when the phone cost has already been satisfied. Sprint,at&t,VZ and Tmo all were milking the customer and im glad they lost.
I'm sure none of it compares to the YEARS of customers paying fees for text messages which cost the company NOTHING more then regular cell service which we all already pay for.
@nukee
And I honestly wish you had not said that. You sound like the CEO of Verizon. Is it that hard to see? Handsets are subsidized because you agree to pay over the period of the contract. So why a flat rate charge when you have been paying for, say, 23 months and have one month to go?
And also, in case you didn't know, people sign these contracts because in USA that's the only decent way to go with a good carrier. Prepaid options are atrocious, and other than 2-3 major carriers, rest are not good nationwide. So people are kinda "forced" into these agreements anyway. (please note the quotes and don't lecture me on how nobody is forced in this free nation)
So if a court finally speaks out in favor of the common sense, I say, so be it 100 more times!
@SteveBaldmer I'll agree the ETF should be pro-rated. But if you don't like the terms of the contract, don't sign it. Look to another carrier or just buy the phone outright.
@who said what
I hate to be the antagonist because I don't like ETFs either, but nukee is right. The ETF was in the contract when you signed it.
And you don't have to sign a 2 year agreement to get service from any carrier. You only did that so you wouldn't have to pay full price for your phone.
@nwalk7800
Yes, which is fine with me. Yes, I signed the contract because I wanted a subsidized phone. And I willingly agreed to pay it off over the next 2 years. So no, the carrier wasn't just being generous to me. I basically "borrowed" the rest of the amount of the phone price which I needed to pay off in the next 2 years. And now that I've paid almost all of it back in 23 months, they should charge me the remaining amount for one month and not the full amount and I'd gladly pay that amount. But $175/$350 flat rate? It's not justified, I think.
@nukee
All the major carriers do this, and there will always be scenarios where buying the phone outright is not an option for people who actually need a phone. You're missing the point in that this is a step in the right direction in getting these contracts to be appropriate for both parties and not be used as a tool to fill provider's pockets. Don't settle for these ridiculous agreements they stick on people and don't defend price gouging where it's not appropriate.
@nukee
@Exbloder
I think you're missing the point. This is a Contract Law issue. Under contract law, you usually cannot charge someone a penalty for breaking a contract. Where the buyer breaks a contract, the seller is only entitled to what they would have gotten if the contract was carried out. For example, if you were suppose to make 10 dollars on some deal and the contract has a clause that says, "if seller breaks the contract, the seller has to pay 100 dollars," thats not allowable under contract law. If you're the seller and you want to rip off people like this, you can put it in your contract but just don't go crying to the law/judge/courts to help you enforce it. That's bull.
This isn't an American thing or a "modern day society is so litigious" thing. This is how its been since the founding of the country and even old england.
Think about it terms of a mortgage on a house- what if you made every payment on a 20 year mortgage for 500k, pay off $595,000 and miss the last payment? There is no jurisdiction ANYWHERE that would say the bank owns the house.
It's on a very different scope, but its the same thinking here. If I bail out on a wireless co at month 23... I pay 200... on month 1 I also pay 200? That not only goes against hundreds of years of contract law... on a everyday level, that's just bull.
and w/so many bad court decisions going around and government messing up things left and right, i for one and very glad this one came out the way it did.
@forward199
whoops- mortgage example was messed up. Mortgage on a house for 500k and you've paid $495,000*
@who said what
There are tons of reasons why one would want to cancel their contract for reasons beyond their control. For me - it was a move. Once I moved to a new location I had terrible service at my home and none at my office. However, because I showed some connectivity at home I couldn't get out of my contract. Ended up paying the ETF.
It should be simple - Verizon pays "x" dollars for a phone (let's say $350). They offer the phone for $200 on contract. Over the next 24 months the customer should be paying down that $150 subsidy. Under no circumstances should the ETF exceed the original subsidy amount.
@forward199 Still messed up. If you have one payment to go on a 20yr $500K mortgage, you have paye WAY more than $500K already. That is unless you have found a 0% loan, in which case, let us all know about it.
@sejohannsenearthlinknet
Ha-
Principal dude. ... ...
I really hope you're not counting your interest portion for your car/house. You have a bigggg surprise waiting you if do! ;)
@sejohannsenearthlinknet You are nit-picking at details and your nit-picking has no point nor does it dismiss the argument.
See, when it's explained like that, I agree with it.
@nukee
That's only because you're a fucking idiot.
What does this mean if you paid the full amount yet are not named in the class action lawsuit?
$87.50?
Seems like it would have been a better deal for everyone to give out a month or two of free service.
Though something tells me all of these people aren't still on Verizon.
@Spaceshipped correct me if im wrong... if you payed an ETF to verizon, how would you still be a verizon client?
@Spaceshipped If someone canceled their contract for what was, to them, shitty service, why would they accept more of the same shitty service even if it was free?
This is great, Does that mean I can not argue myself out of the 60 buck ETF for my contract ending in August?
AT&T is next in line!
@keplenk
AT&T already lost one. Next in line is T-Mobile, since they still want to charge me $200 ETF when I have 1yr left in my contract.
@m3nphls No, they're up for making you pay an ETF twice on the N1.
@m3nphls
dude just pay $35 and switch to emp no contract or etf.