Judge Rules Sprint Early Termination Fees Illegal 343
Antiglobalism writes to tell us that an Alameda County Judge has ruled against Sprint Nextel in a class-action lawsuit, awarding customers $18.2 million in restitution for early termination fees. "Though the decision could be appealed, it's the first in the country to declare the fees illegal in a state and could affect other similar lawsuits, with broad implications for the nation's fast-growing legions of cell phone users. The judge - who is overseeing several other suits against telecommunications companies that involve similar fees - also told the company to stop trying to collect $54.7 million from other customers who haven't yet paid the charges they were assessed. The suit said about 2 million Californians were assessed the fee."
Comment removed (Score:2, Interesting)
Bad News (Score:3, Interesting)
Re:Anybody think that this will change anything? (Score:3, Interesting)
I don't know about Asia, but I know in the UK all providers offer free phones for 18-24 month contracts. Termination fees are prorated, in that you have to pay for the remaining months on the contract. If you get cold feet early on, this is a helluva lot more than the $200 you have to pay Sprint today.
The primary difference is that it's much easier to buy any old (or new) phone and buy a sim on any provider. The networks aren't anywhere near as locked down as they are here.
Re:Bad News (Score:5, Interesting)
You have it backwards. You aren't paying $30 less per month for being in a 2-year contract. People who aren't in a contract or who bought their own phones full price are paying $30 per month too much. The phone companies set up a pricing structure which included prorated charges and termination fees for subsidized phones, but didn't remove those charges for people whose phones weren't being subsidized. If I paid for my phone up-front or it's paid off, why should I be forced into a contract to get lower rates or be charged an early termination fee?
The way it should work is there should be a base monthly fee for phone service and only phone service. If you want the phone company to give you a phone for a no-money-down (or $50-$100 down), then it should be structured as a loan and added on to your bill. If you end your service before the loan is repaid, you're on the hook for the balance of the loan - that's your termination fee. Those of us with old or fully paid for phones shouldn't be paying extra just because the phone company's pricing structure assumes everyone's phone is subsidized.
Re:Is this s precedent in Canada too? (Score:3, Interesting)
Since Sprint operates in Canada, I wonder whether this can be taken as precedent in Canada as well. I'd be glad if it did.
I guess we always figured that our companies down here, even if they operate elsewhere under the same name, tended to dish out exclusive abuses to those of us living here. Apologies if you are subjected to the same level of customer dis-service that passes as normal here.
I recall previous discussions where European cell customers were astonished that we still pay to receive calls (and text messages) here in the states.
Re:Anybody think that this will change anything? (Score:2, Interesting)
You can do this in the US, the big problem is that you qualify for better monthly rates with a contract, this shouldn't be allowed. Phone costs are arbitrary in comparison to your plan.
In two years, a $99/month plan costs you $2376 before taxes. A $300 phone isn't such a big deal is it?
Interest Only makes sense for some people (Score:3, Interesting)
An I/O loan would be great if you were on a variable income - perhaps self-employed or on commission.
That way you can make IO payments in the leaner months and when you get a big check you can pay down your loan.
There's nothing inherently bad about ARMs either and even NegAms have a place.
The real problem here is that people signed things without reading them over and understanding them. What percentage of the general public could even work out a loan payment?
I had a slightly surreal experience buying a car. We negotiated $20k even with a 0% rate for 5 years while I was sitting with the finance guy at the dealership.
Me: "Ok, so that's $333 a month"
He shot me a strange look, and proceeded to punch the numbers into his calculator (including the 0% interest rate) and was surprised to get the same figure as i'd worked out in my head.
If the finance guy are a car dealership is that slow, i dread to imagine where the average person is.
Re:Anybody think that this will change anything? (Score:3, Interesting)
Re:Case Law Precedent? (Score:3, Interesting)
Actually, the root cause is that the availability of artificially cheap money (read: credit) by the Federal Reserve misprices risk: this has resulted inâ"at leastâ"the tech bubble in the late 90's and the housing bubble in the 00's.
Since no one in power recognizes or at least wants to admit that the Fed is the cause of these problems, expect a new bubble to appear soon.
Re:Case Law Precedent? (Score:3, Interesting)
there is no guarantee the house will be higher value in later years, especially 5 years away.
It's a bad loan, and a bad investment.
Of course, I am extremely hardline. I wouild make it illegal to have a home loan longer then 10 years, and not allow balloon payments.
Yes, people would still get homes, they would lust need to become more reasonably priced.
The cost of a home compared to income has become stupid. Compare it to 40 years ago.
Yes, I do own a home, my second one in fact.
Re:Key Legal Principles: (Score:3, Interesting)
Lifting by the boot straps? (Score:4, Interesting)
Whether Sabraw's ruling will stand isn't clear. Experts say an appeal is likely, and the Federal Communications Commission is considering imposing a rule - backed by the wireless industry - which might decree that only federal authorities can regulate early termination fees.
Sorry, Charley, Tenth Amendment says no:
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
You just can't make jurisdiction up, but they certainly do try. They'll try to call it "interstate commerce", even though that provision was meant to keep the interstate commerce unimpeded, and not to be a source of power grabs.
About damn time (Score:2, Interesting)
They said it didn't work that way and I had to pay termination fees. I had three phones, and the termination charge was about $300 per phone. After about 6 months of harassment and threats they finally gave up. I'll never give those losers another dime.
Re:Case Law Precedent? (Score:5, Interesting)
You think that's a free ride? Let's go over this again:
1. They have no home. Back to apartments for them.
2. They lost their savings.
3. They probably took on more debt.
4. Their ability to get new credit or make large purchases (e.g. a vehicle) is now stunted.
5. They have no hope of seeing another house for several years into the future.
6. Any long term plans they made are probably shot.
So how exactly is that a free ride? It sounds to me like they'll be paying a hefty price for quite a long time!
Re:I don't get it (Score:3, Interesting)
Because early termination fees are liquidated damages, which are only permitted in certain cases (extremely roughly, where they serve as a reasonable proxy for actual damages that would otherwise be hard to pin down.) By not, for instance, prorating the early termination fee (which is notionally justified by the damage Sprint suffers due to subsidizing phone purchases in anticipation of the profits of the contract over the minimum duration), Sprint made it so that the fees are not a reasonable proxy for the damages that justify the fees.
Re:Case Law Precedent? (Score:4, Interesting)
You think that's a free ride? Let's go over this again:
1. They have no home. Back to apartments for them.
Actually, it's worse than that. To my knowledge, most decent apartment complexes do credit checks on prospective renters. So if you have bad credit (like a recent foreclosure), many apartments will not rent to you. So where are you going to live now? A lot of these people probably ended up either moving in with family, or renting ghetto apartments.
Re:Case Law Precedent? (Score:5, Interesting)
Yes, and that's why we shouldn't subsidize the risky loans. There's no way the financial institution would actually offer a loan that they know could not be repaid if the institution had to take the hit when the borrower walked away from the deal.
But instead of taking that hit, the lender lets the government bail them out of their stupid lending decisions so at the end, society is responsible for protecting people from themselves. We're protecting irresponsible lenders. The irresponsible borrowers take a bad credit hit which can have fairly nasty consequences, even to the point of making it difficult to get a job. The lender doesn't have to deal with those kind of consequences.
That bailout needs to go away. When Fannie Mae and Freddie Mac got into trouble, it almost did, but then the government bailed them out, so we're right where we always have been.
Perhaps you don't feel sorry for irresponsible borrowers, but they actually have an effect on the market that hurts everyone. If I want to get a 15 year mortgage at a decent interest rate, I have to remember that I will be placing competing bids with others who probably have 30 year loans, perhaps even interest-only loans with much lower payments. Those people will be easily able to outbid me, driving the price of the homes I am interested in beyond my means. In the end, I may be forced to take a different type of loan so that I don't end up in a dangerous neighborhood. The lenders love this, and will do everything they can to encourage it. The best way to discourage it is to make them pay for their own mistakes!
Re:Case Law Precedent? (Score:4, Interesting)
This is pure BS. Perhaps some played it as you describe, although it's incredibly stupid of them to have done and their credit is completely fucking shot now.
However, there's plenty of others that are completely devastated now. Like me. I told the loan agent up front what I could afford per month. I was told the home I was looking at would be less per month than I had set as a limit. So I agree, we get to the closing table, and I'm giving a totally different figure that's higher than what I had set as my limit. When I tried to back out, I was blindsided by a host of financial terms and figures that could only be described as pure fucking magic to my eyes, because none of those financial things are simple basic algebra. They shuffle money here and there and I'm told to just not worry about it, I wouldn't have been approved if I couldn't pay it.
Ok, I payed for almost 2 years on the home, struggling the whole way, only to have a major item go out and require replacing. One partial payment incurred a massive backlash of fees and they didn't even count my payment, and the next few payments didn't count either according to them. In the end, I've lost the home, couldn't get anyone to rent to me anymore because of it, my credit is completely shot and my savings is completely gone. Several loans I had to take out to cover major items in the home such as AC and water heater (you cannot live in the Midwest without AC, you die) I'm still on the hook for even though I don't even have the item anymore.
Now tell me, you callous asshole, that the past two years have been a fucking "free ride". I will now have to declare bankruptcy, I have no home, can't get anyone to rent to me so I'm stuck living with relatives, and all of my savings is gone. But that home did me such good, didn't it?
Re:About damn time (Score:3, Interesting)
No, they are rapists because they charged him a cancellation fee for canceling lines he did not cancel. He wanted to keep those accounts open to the end of the contract and pay on them, but they refused because they could extract more for asserting that he violated a contract that he did not violate.
You did terminate your plan and broke contract.
He didn't terminate the plan. He wanted to keep paying on the plan.
You broke contract by moving the number, and offering later to pay the remaining months doesn't change the fact that you broke contract.
Can you point me to where in his contract he is not allowed to port his number? He wished to continue the contract on those lines, but was denied that. Unless you can point to the part of his contract he violated "Thou Shall Not Port" not being in mine, and I checked, then I will presume you a liar and a troll. Oh wait. AC. You are a liar and a troll. Sorry, my bad. I fed a troll.
Re:Interest Only makes sense for some people (Score:3, Interesting)
An I/O loan would be great if you were on a variable income - perhaps self-employed or on commission
It also makes a lot of sense for people who are planning to be in a home for a short time and need to free their income up for other things.
I'm going to be buying a house in a couple of months, and I want the closest thing to interest-only I can get. I'm buying because (a) there's not much of anything available for rent in the small town (pop. 1000) I'm moving to, (b) I think I can make some money by fixing the home up for when I re-sell it (there's also good reason to expect a real-estate boom in the area in the next two to three years) and (c) I'm also going to be building a new home, and I'd rather free up my income for costs incidental to that process. In addition to interest-only payments, I also want to put as little down as possible, so that I can put most of the equity from my current home into the new construction, rather than locking it up in my interim living arrangements.
So, I want minimal closing costs, as little as possible down, and a huge five-year balloon, to keep my monthly payments as low as I can get them. I want a five year balloon, though, nothing shorter, in case the home is hard to sell. I don't think that will be the case, but it's a risk I need to manage. If I need to I can make the payments on the new home and the interim home for a while, and the four years between the move to the new home and the balloon on the interim home will give me plenty of time to sell.
That sort of loan makes perfect sense for a solvent individual with an income that is more than capable of making the payments with ease and a top credit rating. It's a really bad idea for a low-income, debt-ridden person with a shaky credit rating, because clearly they're taking the deal not because they have some financial strategy for it, but because it's the only way they can get a payment that they can make.
The problem isn't the type of loan, it's making it to the wrong person.
Re:Case Law Precedent? (Score:3, Interesting)