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."
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Re:Case Law Precedent? (Score:5, Insightful)
This sounds like a good time to get one of those $199 subsidized iPhones and walk away from the contract.
But isn't the whole mortgage crisis [dissidentvoice.org] based on the same principle? People walking away from their contracts?
No, the mortgage crisis was caused by a combination of irresponsible lending practices by lenders and people attempting to live beyond their means. People walking away from the contracts was an effect, not a cause.
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Re:Case Law Precedent? (Score:4, Informative)
Some of the problem is people signing stupid loans (A 5-1 ARM with a ridiculous teaser rate?). Because credit tightened up, in order to sell the home (or refinance) before the fixed period was up (almost everyone's plan), they would need to take a loss... which they couldn't do because they were in a negative equity situation.
I think that more so than people choosing to live beyond their means, it was people paying too much for properties they bought... the necessary market correction in property prices left a lot of people in bad shape. Speculation that property prices would continue rising is as much to blame as bad lending practices and poor budgeting.
Re:Case Law Precedent? (Score:5, Insightful)
ARM5-1 isn't a stupid loan. Its a low rate for 5 years. The idea is that before the 5 years are up you either sell, or refinance to avoid the higher rate (possibly to another 5-1, possibly not). It's actually a smart idea if you don't plan on living there 30 years. Now if you want a bad loan, look at interest only, 3 month ARMs, and negative amortization loans.
Re:Case Law Precedent? (Score:5, Insightful)
Sure, the lender will (if they are smart) renegotiate with the borrower... but many borrowers find it a better proposition to walk away and declare bankruptcy.
Yes, IO 3 month ARMs are REALLY bad... unless you're just flipping the property. Negative amortisation loans, same deal. Either case, you better know what's going on in the housing market locally before you jump in.
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
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If the finance guy are a car dealership is that slow, i dread to imagine where the average person is.
Not being good at math in your head qualifies as "slow"? I had no idea.
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The point was that he's the *finance* guy, and the calculation was 20000/60, not usually a challenging task for someone who works with numbers all day.
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Except his job is not to work with numbers all day. His job is to make you feel good about your purchase and borrowing decision, since he's the last person you spend significant time with before you take delivery. It helps compensate for the slimey feeling you get after dealing with the sales slob and the sales manager.
YMMV. My experience is pretty much
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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 ar
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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.
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To be a little more complete, the easily available credit also increased demand on real estate, thus driving prices upward drastically... and the combination of tightened credit availability and a slower economy has now caused prices to fall, leaving people in a negative equity situation.
Better yet, define that as a feedback loop - increased demand for real estate gave people a lot of equity they could use for even *more* easily available credit! Yay!
So you had people taking out loans they couldn't affo
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But an even more fun game for those of us who sold in 06 or early 07 and are now looking at buying on the cheap.
A coworker of mine sold his house in April 06 for $825,000. He just bought the same house back, with about 40k in improvements, for $675,000. There were two successive owners in the time he did not own the house. I wish I had his foresight... but I didn't get into the game until 2004, so my profits were much lower.
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The insane jumps in "fair market" valuation and the reasons for them are to blame. Manipulation of markets, flipping the properties, shopping for appraisals and far more nefarious dealings set the bar lower for ethics in yet another field in America. People everywhere were making money off real estate and most of them were idiots. Welcome to America, where as long as a gaggle of lawyers can successfully defend injustice or impeach justice in a court of law that lawyers (senators, judges and supreme court
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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.
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Ah yes, the old "it's the Fed!" canard. It has nothing to do whatsoever with relaxation of regulatory controls on the bankig industry that are not within the scope of the Fed. Right.
Re:Case Law Precedent? (Score:4, Informative)
Yes, creating risky or bad debt by giving loans to people who cannot afford them was a key part of the problem.
But the reason the crisis has exacerbated, and badly hurt major financial institutions (CitiBank, IndyMac) is because the process of debt selling allowed bad debt to be masked as good debt. There were insufficient safeguards to make sure that the people (investors, businesses, financial institutions, etc.) that put their money into these debts knew that they were as risky as they truly were.
Consider the Freddie Mac situation. As a quasi-private company, Freddie Mac is directed to make a profit. However, as a quasi-government entity, they have special rights such as the right to use the Federal Reserve as their bank, and the right to guaranteed loans at preset rates. These guarantees made Freddie Mac have an impeccable credit rating, despite the fact that, to continue growing their profit, they kept buying more and more debt that was downright awful.
In other words, Freddie Mac's credit rating didn't reflect the junk nature of their assets. The same is true for CitiBank and IndyMac and other banks that held debt that they may-or-may-not have known was bad, but wasn't being shown as bad on their books.
Things that could have prevented this:
1) Congress has decided that our country is more stable when people own their own residence, so it encourages home ownership. Freddie Mac exists for this reason. I think this conflicts greatly with their charge to earn a profit. Wikipedia says this: "Both Alan Greenspan and Ben Bernanke have spoken publicly in favor of greater regulation of the GSEs, because of the size of their holdings and the widespread perception that they are government backed.", which to me indicates that they agree. This quasi-goverment thing doesn't work. They should have been government owned, or privatized completely.
2) To avoid your home-town bank from getting its fingers (and your money) dirty in less-than-reliable debt, the depression-era Glass-Steagall Act [wikipedia.org], among other things, prevented banks from offering things like investments and insurance. The late-90s Gramm-Leach-Bliley Act [wikipedia.org] repealed those parts, allowing banks, insurance companies, and investment firms to co-mingle. It's been argued that this relaxation of regulation also contributed to the crisis, as it allowed institutions that need to be stable for financial security (banks) to engage in the riskier activities of investment firms.
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Incredibly, I'm going to have to pay back my student loans while these "classic" parasites get a free ride.
Re:Case Law Precedent? (Score:5, Insightful)
I don't see where the "free ride" comes in. They lost the home, wiped out their savings, probably increased their debt, and (almost certainly) killed their credit rating. It will be a long time before they can attempt to own a home again, even if we assume they've learned from the experience.
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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: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, Funny)
A dress? Really?
This is a perfect place for a car analogy and you went with a custom-tailored silk dress? I mean... Driving around for 6 months without making payments and getting the car repossessed ~= A free car rental with the credit penalty being the only downside. It's that easy.
A dress?
Re:Case Law Precedent? (Score:4, Insightful)
I haven't finished paying for my home either. Obviously it's not truly mine. It's the bank's by way of lien until I finish paying it off. However, I do get to live there as long as I continue to make good on my loan. Welcome to mortgage 101.
The original poster explicitly said: "Needless to say within 6 months of blowing through their saving is came down to deciding to sell the house or starve to death."
Whether they got a zero down loan or not, they lost their savings in a futile attempt to be responsible after the fact.
My presumption is based on the fact that they actually made a serious attempt to pay for that home. If they managed to blow through all their savings in an attempt to pay for it, I can practically guarantee they also took on further debt as a direct result. Whether it be from putting groceries and goods on credit cards that didn't get paid off, or from borrowing to pay off bills they couldn't afford, there's a good chance they are now saddled with additional debt.
Well, I'm glad we can agree on something. :-P
Not necessarily. If they had gone through a better decision making process, there's a good chance they could have found a home that met their needs just as well and still be living in it today. i.e. The plan itself isn't always flawed. Sometimes it's just the execution. Which seems like a fairly likely situation if they foolishly obtained a house that had a $3500/mo mortgage on a $5000/mo income. As a home owner in a major city, I can tell you there are more affordable places to live.
I can see that the dressmaker would be a moron. Dresses lose most of their value as soon as they're worn. They don't make very good collateral against a loan. A house, on the other hand, usually gains value rather than losing it. Which means that the bank can repossess the home and resell it for what is left on the loan. The bank ends up getting their money, plus whatever profits they made off the borrowers while they were borrowing. A win-win deal for banks.
The only reason why things have gotten bad is NOT because people are defaulting on their mortgages. The banks hedged their bets and thought they would be fine in any situation. The reason why things have gotten bad was that banks got greedy and lent a massive number of loans they knew were unreasonable. The result was that the market flooded with repossessed property and the banks starting taking a loss.
So I guess your analogy does work. The banks were as foolish as that dress maker! :-P
Re:Case Law Precedent? (Score:5, Insightful)
I'll add my spin on this one. I'll even go with your silly dress analogy (how on earth did you come up with this anyway?).
Let's say they promised a dressmaker $100 per month for a year for the dress, and then $1000 per month for the next 5 years afterwards (some more realistic numbers, since custom dresses usually cost many thousands of dollars, judging by what I've heard about bridal gowns). The dressmaker does a credit check, and finds that the buyer makes $15k/year working in fast food. The buyer can afford the $100/month, barely, but no way can she afford the $1000/month. The dressmaker decides to approve this financing for the buyer, knowing there's no way she can afford it after the first year. For the first year, the buyer pays the $100/month. Then, when the payments go up to 1k, she defaults. Dressmaker is outraged!
Who's the aggrieved party here? The one who stupidly made the loan, or the one who took advantage of the stupidity (ruining her credit in the process)? Personally, I think the blame falls on the lender, for making such a stupid decision. There's definitely times when people should be punished for taking advantage of the system, but this isn't one of those times. These lenders were absolutely corrupt and stupid for approving these loans, and they deserve to lose their businesses over them. The bad buyers are already getting punished, in a way; their credit is ruined, and they won't be buying a house again soon. That's punishment enough.
Also remember, the lenders never actually lost anything. The people borrowed money to buy these houses, and they used the houses as collateral. Remember that word? This means that the lenders agreed that these houses were worth what they were lending for them. When the buyers defaulted, the lenders repossessed the houses, and even kept all the mortgage payments already made. If the lenders can't get the same amount for those houses, that's their problem: they should have though about that first, instead of assuming that realty values always rise.
If you're going to lend money to people, it's up to you to make sure they're worthy of lending to. This is especially true for large financial institutions, who can easily afford to do all the necessary credit checks. The whole concept of the ARM is rooted in greed, and the lenders deserve to go out of business for making so many bad loans.
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Closer, but not quite.
The dressmaker agreed to sell the dress for $100/mo for the first year, and then an undetermined amount for the next five years. At this point, any reasonable person would say, "Screw you!" "Oh no!" the dressmaker replies, "The market for dresses is through the roof! In a year, you'll be able to sell this for way more than you paid and upgrade to a new, better dress!"
If only it was just stupidity... (Score:3, Insightful)
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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?
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1 2 & 3: They made mortgage payments for 6 months, in addition to their car payments, credit card payments, etc. People that do things like this also tend to eat out a lot, which gets expensive. There's more money going out than there is coming in, so that's where their savings goes until they have no savings left, at which point, they start missing bills or paying them with credit cards, thus creating m
Re:Case Law Precedent? (Score:5, Insightful)
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$5,000 net monthly would seem to be around $75,000 anually,
Actually, it would be around $94K gross (in a state with income tax), and it would be closer to $500K mortgage, assuming the interest rates were typical for some of the "shaky" loans that were made.
They still definitely overcommitted, but where I live, $500K doesn't buy a whole lot of house. There's no way I could afford to buy the house I live in right now, but I got lucky and bought a while ago at the bottom of the market and was close to the same state they were for a while ($1,200 house payment on abou
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Let's say Couple A and Couple B are both bidding on a house. Both couples make roughly the same amount of money, have roughly the same amount of savings, and so forth. Couple A is sensible, and not willing to spend more than they can afford. Couple B, on the other hand, is more willing to take the risk, and bids up the house to a level they really can't afford
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!
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They were idiotic and got exactly what they deserved.
Since you're here, you're most likely an intelligent person who would never sign a contract without reading and understanding it. That's not normal. Unfortunately, normal is sign without reading. I'm not saying it's smart or right, just what most people do. Most people have no idea what's in their mortgage contract. Instead, they listen to the (dishonest) sales pitch from their broker and believed them. It's no wonder so many people are surprised w
Re:Case Law Precedent? (Score:4, Informative)
ARMs got a bad rap on that one (Score:4, Informative)
The high risk mortgage comes in where people were allowed to outright lie about their income and took on mortgage products traditionally used by people who had sterling credit. But the key is the outright lie there...if you're making 20K and then the broker has fluffed and self-reported your income to 50K or 60K, it doesn't matter what kind of loan you have, it's going bad.
On top of that, everybody went "Real Estate always goes UP!!!" which is flat out wrong and then used that to rate a loan that should have been a D into a B or C, thus putting a whole lot less risk on paper and making mortgage backed securities look like treasury bonds when they more like junk bonds.
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I was just wondering if this will cause a ripple effect to the legality of penalties for early exit from any contract, not just a cell phone contract.
Any lawyers out there care to offer an opinion?
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Nope the mortgage crisis was from idiots buying more house than they could afford and now defaulting on it.
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Which has always happened. The problem was lenders underrating the risk and puffing up the credit rating, which in turn puffed up the credit rating of their mortgage-backed bonds, which allowed them to sell them better.
Anybody think that this will change anything? (Score:5, Insightful)
Prorated termination costs seem reasonable, especially given the subsidies on the hardware. I was surprised to see that Sprint is the only company that doesn't prorate. I figured the wireless companies would avoid any change that makes it easier for customers to change providers. When selling a commodity it's essential to avoid the profit-killing, competing-on-price, race to the bottom.
This will be appealed, so I don't see anything changing in the short term. The figures on the $55 million in uncollected fees is impressive. It would be interesting to know how much of that would be profit after subtracting the depreciated cost of subsidized hardware.
The disappearance of the 1-year contract bugs me, but at least it's easier to move up and down in rate plans once you've signed up.
And yes, it would be nice to have the option to buy unlocked phones from any vendor and use them with any provider, but I'd bet that less than a quarter of the customer base would make use of this on a regular basis. TMobile comes closest to supporting this now, but I left them when I got an IPhone and really do miss dealing with them. Their customer service web site is far superior to AT&T's.
Re:Anybody think that this will change anything? (Score:4, Insightful)
Re:Anybody think that this will change anything? (Score:5, Insightful)
Plenty of people in Europe have subsidised phones on contract. Of course you can also go pre-paid, or buy a phone seperately, or get a SIM-only contract.. but there's no system in Europe in place which prevents subsidised phones.
The big difference is probably that we can get any phone from any store with basically any out of half a dozen different operators while in the US in most areas you have fewer choices of providers, if what I've been hearing here is correct.
Buy me out (Score:4, Informative)
Canada on contracts (Score:2)
I recently tried to get my girlfriend signed up with Roger's, using an existing phone, sans-contract.
Rogers no longer seems to allow *any* of their (weekend/evening/friends/etc) rate plans other than a by-the-minute plan without a contract. This doesn't work for my girlfriend, as she'll be out of the country for 4-6 months near the end of this year and early next, and doesn't want to be paying for a phone that's unused.
So we had to go with Telus, which tends to have much crappier building penetration (the T
Re:Anybody think that this will change anything? (Score:4, Informative)
Re:Anybody think that this will change anything? (Score:4, Insightful)
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The US locks the phone to the carrier. You can't simply whip out the SIM and put in another like you can in Europe.
I can get just about any phone unlocked for five or ten bucks at a nearby electronics mall.
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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:Anybody think that this will change anything? (Score:5, Insightful)
The problem is, that if you bring your own phone, (or purchase outright) you are still paying for the subsidized cost in the plans.. Personally, it would make alot more sense to me if they split out the bill so that your Cell Service was (for example) $45, and the Phone purchase was $5 each month. (instead of a $50/month plan). Then, there would actually be a benefit to bringing in your own phone. Cable Internet companies, at least in my area, do this, I pay for internet, and I pay $x/month on top for the "cable modem rental fee".
Re:Anybody think that this will change anything? (Score:5, Insightful)
Or how about after your initial contract runs out? Right now I'm in a 2 year contract with AT&T. I don't expect my $40/mo to go down after I "pay" for my phone, even though that's the whole theory behind the contract.
Since the phone is now mine, why don't I get a lower, unsubsidized rate?
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The subsidized phone cost is really the root of this problem. I wonder if America would just be better off if we moved to a system like in Europe and Asia, where phones cost much more, and the plans are significantly reduced.
At least in Europe, plan length is reduced (and much more commonly prepaid per minute than in the US), not cost, at least for voice.
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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?
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The good old days (Score:2)
I wonder if America would just be better off if we moved to a system like in Europe and Asia, where phones cost much more, and the plans are significantly reduced.
I long for the days when this was reality. I remember dropping $200 for a phone and then choosing my service plan and not being tied to a contract. I had the same phone number for almost 10 years. Every few months I would look to see if there was a better plan available from my provider. Never happened the rates I had were consistently lower then newer rates and I would be required to go back on contract. What finally broke me down was needing to switch from TDMA to the newer networks. Two years late
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Re:Anybody think that this will change anything? (Score:5, Insightful)
Maybe only a quarter of the customer base would use it, but everyone would benefit by the increase in competition that would result.
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While it's not true for every company in every business, cellular companies in particular might, just for a change, try to avoid the "profit-killing, competing-on-price, race to the bottom" by offering other, non-price-bound differentiators.
An obvious differentiator would be some combination of responsive customer service + treating-customers-like-adults + a clear explanation of services available for purchase.
Right now all the money that would go into creating such differentiators is being poured into adve
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Better customer service for a commodity purchase isn't usually enough of a differentiator for the average American consumer. Most of us don't even care about quality over price (WalMart!). Nextel used to push the business angle but ever since they got absorbed by Sprint you don't see those ads anymore.
Only Verizon really pushes quality in their advertising, and they're really talking more about call quality than customer support.
Most US phone providers focus on specific price reductions (Alltel's ads about
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Ah, they don't need to MARKET the customer service stuff, they need to DO it.
Even without the $$$ lock-in, there is an implicit switching cost to changing carriers, consisting of the search-and-compare cost + time spent making the actual change.
I'm suggesting they spend some money on retention rather than spending most of it on attempts to snipe from other carriers. This is the basis of the downward spiral to price-based differentiation.
I suspect that the primary motive to jump carriers is to get a free ne
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>Prorated termination costs seem reasonable, especially given the subsidies on the hardware.
Not everyone gets discounted hardware. I bought my current PDA used off ebay and got no break from Sprint on my monthly charges. I'm paying for your whole because of this broken system. I should have the right to break my contract if I didnt get a free phone.
Not to mention, Sprint adds 2 more years for most changes. Discounted text plan? 2 year renewal. 2nd line? 2 year renewal. Move to family plan. 2 year renewa
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This changes everything (Score:2, Insightful)
I don't understand (Score:4, Insightful)
I hate cell companies as much as anybody, but that's how they subsidise those cheap phone prices.
Re:I don't understand (Score:5, Informative)
Because cell phone companies aren't willing to negotiate contracts with consumers, and the few cell phone companies that consumers can choose from all have equally evil contracts.
Also, contracts are only valid if there's a quid pro quo - if there's no prorating, the judge may take that into account.
In the end, contracts are only binding if they are legal - you can't sell yourself into slavery, you can't contract out a hit on someone, etc etc.
Re:I don't understand (Score:5, Insightful)
According to this article, it was a violation of California's unfair business practices act:
http://www.baltimoresun.com/business/bal-bz.sprint30jul30,0,2416808.story [baltimoresun.com]
"Wireless carriers say early termination fees are necessary so the companies can recover the cost of mobile phones, which they subsidize when customers sign long-term service contracts.
But the judge in her ruling said the contracts were "implemented primarily as a means to discourage customers from leaving" and that the company gave little regard to the cost of broken contracts."
And remember, in the United States, just because something is clearly stated in a contract doesn't mean the contract is enforceable. For instance, a contract to make yourself a slave will not be enforced by a court.
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IMO, threat of early termination fees keeps subscribers paying far past the point of subsidizing cheap phones. Telcos take a back seat only to oil companies on the scumbag scale. I get a reminder of that every month in the mail.
Re:I don't understand (Score:4, Informative)
The problem is twofold. One, the ETF is charged indiscriminately, regardless of the value of the subsidy. This means that it is a deterrent from switching carriers for those who owe no subsidy. Two, Sprint does not prorate its ETF (or did not, as of this lawsuit) like e.g., AT&T does.
Addressing both of these concerns with a subsidy-recovery fee would be perfectly enforceable. The summary's implication that this may start a domino effect is a relatively obtuse statement.
Penalties for breaking contracts are upheld daily by law if disclosed. Penalties that are in no small part cost recovery, doubly so. However, it's been clear for many years that the cellular companies don't actually care about just covering their losses--otherwise they'd be able to tell you at any given point what your prorata share of the original hardware subsidy is. You as a consumer should also have the the right to pay the remaining subsidy amount plus a nominal penalty for processing ($~25), and then be placed on a month-to-month plan or walk away.
Service (Score:2)
I've seen a lot of issues with "popular" cellular providers taking a dump in customer service. Previously, Telus was the big dog in town and would regularly screw customers over. In my hometown their grid was becoming overloaded, and I had a period of 4-5 months where calls mysteriously never made it through (straight to voicemail, and not due to my phone because others experienced the same issue).
Now I'm on Rogers - as with many I made the switch - and while my actual phone service is improved I'm startin
Judge Rules Signed Contracts Are Unenforceable (Score:5, Insightful)
Surely EULAs are even less enforceable than signed contracts?
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From TFA:
" On June 12, a jury in the Alameda County lawsuit ruled in favor of Sprint Nextel, determining that its customers who canceled their service early had breached their contracts with the company and that early termination fees were warranted.
But in overruling that decision, Sabraw said the jurors appear to have erred in assuming the fees were valid, and she took issue with the way Sprint Nextel determined that its customers owed the
Re:Judge Rules Signed Contracts Are Unenforceable (Score:4, Insightful)
I'd be more disturbed if the judge didn't have the power to overule a jury when they're wrong.
The argument is that the jury made a decision that the contract was breached, given that the fees clause was valid.
The judge has now ruled, as a matter of law, that the fees clause was not valid, which makes the jury's judgement of the facts at best irrelevant. Presumably there is now no fact to be tried by a jury - the part of the contract that the customers have supposedly breached is invalid, therefore no breach could have occured, therefore no fees.
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Bad News (Score:3, Interesting)
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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.
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Nope that's not what is being said. They said the cell phone companies were screwing customers and that the termination fee didn't accurately reflect the cost of a broken contract.
The ruling was in favor of the class action plaintiffs because cell phone companies have operated in collusion in regard to early termination fees. Whether that collusion was orchestrated, or merely a in indirectly agreed upon measure to weasel more money from clients, the result is the same.
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I don't get it (Score:2)
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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 pho
Is this s precedent in Canada too? (Score:2)
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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.
Key Legal Principles: (Score:5, Informative)
There are two key points in the article (couldn't the actual opinion) hitting these points:
Interesting; because judges are usually very reluctant to over-ride decisions made by juries. Generally, juries make findings of fact and the Judge makes the finding of law. Here, the Judge said that the Jury clearly erred in finding the contracts valid. Which makes me think that the Jury instructions were extremely poorly written, or that the Judge feels very strongly that the plaintiffs made the legal side of their case so well that "no reasonable jury" would have returned the decision that it did. (Also, I note that the Jury appears to have awarded damages despite finding that the contracts were valid -- this semi-contradictory result may have persuaded the judge to go in the direction she did.)
The second interesting argument:
YES! It is a founding principle of contract law that the non-breaching party's damage recovery is limited to its actual losses and its cost to make up the breaching party's violation of the agreement. Traditionally, a contract that agreed to damages in excess of the non-breaching party's actual exposure (i.e., punative damages) were ruled invalid and "reformed" by the court into something reasonable.
However, the courts over the past few decades have been relunctant to follow this principle -- instead, most consumer contracts today contain a "liquidated damages" clause, where the parties agree ahead of time on an estimate of what the actual damages would be. To me, fundamental principles of contract law dictate that an agreement to excessive liquidated damages clauses (particularly in consumer contracts) should not be upheld. I'm glad to see a court finally moving in that direction.
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*whew* (Score:3, Funny)
This is good news for Sarah Conner.
Changes in service terms. (Score:2, Informative)
Sprint, very frequently, changed rates for various services under the contract. Contract law in most states allows one party to terminate the agreement without penalty when the other imposes material changes. In this situation, they have been known to lie [consumerist.com], which I experienced personally (specifically regarding their text message rate hikes). Glad to see both the market and now the courts punishing them for this ridiculous behavior.
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.
Contract? Court Review? (Score:2)
So, does this mean that any contract could potentially be reviewed by a court and parts of it thrown out? After the fact? In some cases, long after the contract was terminated?
This seems a little uncomfortable to me. It sounds like the judge decided the fees weren't valid and that he decided Sprint didn't justify the fees in terms of actual monetary losses. I know lots of fees for non-compliance that aren't based in any way on monetary losses - the fee exists as a penalty.
I suppose I could see a judge r
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This ruling is a product of the fact that this has been a feature of contract law in this country since before this was a country, yes. It doesn't "mean" that in the sense that suddenly now that will become the case where it hadn't been before.
About damn time (Score:2, Interesting)
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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
Dealing with debt collectors (Score:3, Insightful)
You should keep an eye on the three credit reporting agencies. Verizon may also sell your debt to third parties who might continue to come after you.
When it comes to unfair debt collection, the collection agency is in dodgy water. It seems to me that collection agents are going to be rather afraid on some level of a big possible whammy. --That is, they are just a thin legal line away from being an extortion racket. --A company falsely decides that you owe money, sends it into the collection system, and t
Re:Best News I have heard all day (Score:4, Insightful)
because this is america and people only make decisions on the number they see. you can charge more but then someone will charge less and have a termination fee and this company will get all the business because everyone will say they are cheaper and go with them
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The great American Sin, buy something not at the cheapest price available and not worrying about the long term costs.
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