Washington AG Slams T-Mobile Over Deceptive 'No-Contract' Ads

zacharye writes "Washington State Attorney General Bob Ferguson on Thursday ordered UNcarrier T-Mobile to correct 'deceptive advertising that promised consumers no annual contracts while carrying hidden charges for early termination of phone plans.' T-Mobile, which recently did away with standard cell phone service contracts and typical smartphone subsidies, is accused of misleading consumers by advertising no-contract wireless plans despite requiring that customers sign an agreement that makes them responsible for the full cost of their handsets should they cancel service prematurely ..."

Comments

exactly the same as Blockbuster

[slashmydots]

This is absolutely identical to Blockbuster's "no late fees...well unless you don't bring it back for over a week, then one giant one" problem. In that case though, I think 47 or so states sued them.

Re:exactly the same as Blockbuster

[geekoid]

No, it's not. The advertise no contract; which the provide. If you don't want to pay for the phone up front, you can pay for it over time. Obviously if you leave before you are done paying for it, they want the rest of the money you own them for the phone.

Re:exactly the same as Blockbuster

[Anonymous Coward]

Because you can terminate your cell phone service at anytime, with no penalty. Also, once you finish paying for the phone, your bill is reduced.

Example, I have a $65/month plan, and I have a S3 that I'm paying off at @20/mo.

Right now I pay $65+$20/mo. Once the phone is fully paid for, I'll only pay $65/mo (+ all tax/etc. of course). If I cancel my service before I finish paying off the phone, I still have to pay off the phone.

No even remotely the same as a standard cell service contract.

Re:exactly the same as Blockbuster

[TsuruchiBrian]

It is a contract. It is a contract to pay for the phone over the course of 2 years. The thing that T-Mobile has done is separated the service contract from the phone. You can have a monthly service plan (contract free). You can buy a phone from them, or bring your own phone that you purchased elsewhere. You also have the option of receiving a phone and a loan from them if you sign a contract to pay it back over 2 years.

You can cancel your service any time without a termination fee. You are not able to get out of your agreement to pay for the phone they gave you.

This is orders of magnitude better than what other carriers do. They force you to pay for a new phone with a 2 year service plan whether you get one or not. So everyone gets their "free phone" (that they are already obligated to pay for), and they are also stuck with the same service provider for the next 2 years.

At least with T-mobile you can switch to another carrier. You can even sell your phone on ebay to try to recoup some of the costs if you don't want it anymore.

Re:exactly the same as Blockbuster

[Andy Dodd]

More importantly: If you bring your own phone, or pay for your device outright, you have no contract.

Prior to T-Mobile's offering of no-contract plans - if you paid for your phone outright, or brought your own phone - you STILL had to sign up for a contract.

Re:exactly the same as Blockbuster

[anagama]

No even remotely the same as a standard cell service contract.

I agree. A couple years ago I decided to upgrade my phone (I was already a T-Mobile customer). After looking at the difference between subsidized plans to paying for a phone outright and getting a month-to-month plan, I decided I'd buy the phone. Anyway, when I told the guy what I wanted to do, he said fine, but also, if I wanted to, I could finance the phone at 0% interest for 20 months and have the MTM plan. That was a no brainer so I took that deal instead of laying out the cash.

It was quite obvious the phone and the plan were separate things. And that's what T-Mobile is still doing. It doesn't seem deceptive at all -- rather, in the spirit of "no good deed goes unpunished" -- they're getting criticized for offering a zero or low percentage interest installment plan. If people don't want to be beholden for the remaining balance, they can just put it on a Visa and pay somewhere between 10 and 5billion percent interest. No matter how you pay for the phone, the plan is still the same MTM plan.

Last point, if you buy a phone with decent specs and build quality, it's going to outlast the repayment term. When I bought my last phone, I got an HTC Amaze -- the speed and quality is such that even after a couple years, I have no desire to replace it. It's worth it to spend money on a good phone.

Re:exactly the same as Blockbuster

[Opportunist]

Actually, it's more deceptive than that.

Who buys phones in installments? I mean, let's be honest here, 500 bucks isn't something that's gonna break my bank, it's about the amount I pull out of the ATM 'cause I'm lazy like that and don't want to go there every other day. But there are people where 500 bucks is their monthly budget. I guess we can assume that people who finance a cellphone ain't going to be found among the infamous 1%.

Now what's our not-quite-1% person going to think? Probably "Can't afford 500 bucks, but 30 a month, that's within my range..." and he gets a phone. One of those that don't come with a mandatory "stay with us or pay an early separation fee" contract.

Later that year he finds that there's another carrier offering him better rates. And he's got that sweet deal where he can walk away any time he likes and not be charged with any "cancellation fee". So he tries to cancel his "non-contract" with TM, only to find out that yes, he can walk away right now... if he pays the rest of what he owes for the phone.

Right

Now

Of course, Mr-not-quite-1% can't really afford that, that's likely still a few hundred bucks. So he is forced to stay with them.

He can't afford to get out.

Re:exactly the same as Blockbuster

[Jah-Wren Ryel]

Same as buying a washing machine at Sears on time payments.
Sears wants their money regardless of whether or not you are using the machine.

Sears does not require you to immediately pay off the entire loan on your washing machine if you decide to stop washing clothes with it.

Re:exactly the same as Blockbuster

[Anonymous Coward]

Personally if you cannot afford to drop $350 000 - $700 000 on a house, then you can't afford a mortgage either.

FTFY.

Re:exactly the same as Blockbuster

[pla]

What does that have to do with canceling an unrelated service? There is no loss or damage to the phone, there is no change in the phone owner's financial status.

It takes quite a stretch to call phone service, on a phone, as an "unrelated service". Kudos!

But for the record, those 0% "loans" from Sears on appliances now take the form of a one-time interest free charge on a Discover card. Cancel the card, and yes, it most certainly does come due instantly.

Re:exactly the same as Blockbuster

[pla]

WTF? Are you so blinded by terminology that you don't understand that you can't "cancel" a card? You can only cancel the line of credit. There aren't two things here, you cancel the line of credit obviously all credits are due.

Wha? Calm down, step away from the keyboard, and take a look around before tilting at windmills.

Correct, a card doesn't equal a line of credit. You can have either without the other. But no one - And I do mean no one, ever refers to the one without the other outside a courtroom. A good example of a "service" you can't really decouple from the device in any meaningful way.

Now, if you meant that you don't have any obligation to use that line of credit, rather than spouting off obscenities about suffering all the idiots around, I would agree with you. You can get your appliance interest free for however many months, and then "close your line of credit" ( which the rest of humanity would call "cancelling the card"). The distinction comes up, and indeed, I mentioned it because, some people do not like having credit cards in their name - For example, strict Muslims consider any non-prepaid card a violation of their religion's prohibition against lending money for interest. It therefore matters to some people that their "18 months interest free washing machine" actually comes with a Discover card - and yes, also with an associated line of credit, Mr. Pedant.


Jesus fucking christ you people are idiots. All this confusion about how loans work only proves that the AG was correct to make T-mobile spell it out.

Perhaps some of that confusion comes about from treating "loans" as a monolithic entity. The revolving credit of a credit card functions radically differently than, say, a mortgage, which functions differently than a student loan, which differs from a subsidized purchase under contract.

And none of that has the least bearing on the fact that T Mobile has the most consumer-friendly options available (of the major US carriers, not including the likes of Tracphone here) by far, yet this AG has decided to polish his resume by going after them instead of, for example, the shady backroom deals that limit who you can get an iPhone from.

Car analogy

[michaelmalak]

Yeah, that car I just bought? I'd like to cancel that payment stuff and just keep the car.

What an idiot

[geekoid]

The contract is only if you don't pay for the phone upfront. Obviously if you are pating for it a month at a time they want you to finish paying before you leave.

Right now, you can walk into a T Mobile store, plunk down cash and get a smartphone and not have a contract beyond a month to month agreement; which you can end without fees.

I wonder if it was AT&T or Verizon the complained?

What a silly thing to complain about

[93 Escort Wagon]

T-Mobile is offering consumers the ability to pay for the phone over time - at the same overall cost as if they paid up front - and my state's AG is complaining that they are requiring you still pay for the phone if you walk away from their phone service.

My tax dollars at work, ladies and gentlemen. Since a recent past AG (Gregoire) became governor, I imagine this guy has political aspirations as well and is looking for resume padding he can offer up come election season.