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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 ..."
Yeah, that car I just bought? I'd like to cancel that payment stuff and just keep the car.
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?
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I can't believe that cute girl would do such a thing.
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.
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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.
#DeleteChrome
With a standard cell contract, your recurring charges stay the same indefinitely. You are billed as if your phone is subsidized even if it is not.
There are 0x40000000 types of people: those who understand 32-bit IEEE 754 floating point, and those who don't.
It's a loan, not a cell service contract.
You can cancel your service anytime, just pay up the rest of the principal on the 0% interest loan they're giving you.
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.
I haven't done this yet, but I did get as far as "checking out" online to see what it was like, and they pretty clearly display the $20 per month phone charge, as well as the initially-owed amount (ie, $99 for an HTC One). Online purchasing also gives you the option of paying for it entirely up front.
LegendMUD
Exactly, there are no early termination fees, there is pay for the hardware you haven't finished paying for yet.
Oh I'm sure that there are no shortage of people that 'didn't realize that' but T-Mobile shouldn't be on the hook for the stupidity of the public.
As a side note, I will probably be switching to T-Mobile this weekend. I am fully aware that if I decide switch to someone else next month, I will need to pay for the phone completely and not over the course of 2 years.
"I use a Mac because I'm just better than you are."
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.
What I don't get is why T-Mobile doesn't let you continue paying off the phone on a month-by-month basis after you cancel service. That's the part that's potentially deceptive. One would naturally expect that "no contract service" means that your loan on the phone is not tied to that nonexistent contract. The fact that your phone loan is tied to service means that, in fact, it is a service contract, no matter how T-Mobile tries to spin it.
Check out my sci-fi/humor trilogy at PatriotsBooks.
Oh and BTW Washington AG, the pay for you phone fee is not hidden, they're very up front about it.
"I use a Mac because I'm just better than you are."
All T-Mobile has done is separate the cost of the phone from the cost of the service. You can quit using the service at any time, but you still have to finish paying for the hardware you've purchased. How is that deceptive?
Maybe you're on your first phone contract or have simply never owned a phone out of contract, but I can say for absolute fact that you do not get any special treatment for owning your phone outright. The cost of the plan is a fixed amount, subsidized or not. If you bring your own phone you are only aiding the carrier hedge their bets by paying the same monthly rate as a contracted user but posing zero repayment risk.
That's true with Verizon, AT&T, and Sprint. But not T-Mobile. As soon as you pay for the phone, you're monthly bill goes down. Also, if you bring your own device, you get that dropped rate immediately.
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.
retrorocket.o not found, launch anyway?
Are you being deliberately dim? You are paying for a new phone whether you get one or not because the plans offered cost the same whether or not you bring your own device. I can attest from personal experience with Sprint ... even if you bring your own device they still won't give you a new line without a 2 year service contract that costs exactly the same as it does if you get one of their "free" or "low cost" phones..
You can even sell your phone on ebay to try to recoup some of the costs if you don't want it anymore.
And for the tl;dr set T-Mobile will even buy the phone back and credit that to what you owe.
"A person is smart. People are dumb, panicky dangerous animals and you know it." - K
The advertising just says there is no annual service contract, and that you can use your existing phone. If they were advertising a new phone for free with no future payments there might be a problem, but they didn't do that.
This.
It is a loan, cancel service and the loan comes due.
What they should do is let you cancel service and still finance out the phone. That way there is no room for anyone to complain.
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.
What changed under Obama? Nothing Good
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.
That's true, though it isn't the recent no-contract offering that started it. T-Mobile has been doing it for several years now. My plan has been $20/month cheaper than it otherwise would be ever since I brought my N900 to them three years ago.
This is nonsense. Try doing exactly what you said with Verizon. They won't let arbitrary compatible devices on their network. Call them up to activate and they'll tell you to bring the device to a Verizon store so they can "assess it for compatibility" which just means figure out if you bought it from them or not. If not it magically becomes "incompatible".
It costs tMobile money to make no interest loans.
That's not the reason. The reason is simple: if you cancel service there is no longer any reasonable collateral for the loan on the phone. It is not reasonable for them to have to send someone out to your home to repossess a cell phone. It is very simple for them to turn your service off until you pay your loan. That will be enough stick for most people.
If you've already turned your service off, they have no stick to enforce the loan.
As for this being a contract, it is NOT an annual contract, it is not a contract for phone service. It is a LOAN contract, which you can either accept or not when you get service. You don't have to keep the phone service, and there is no early termination fee for cancelling. YOU have agreed to pay off the phone loan if you cancel your phone service, but you don't have to take a loan to start with, and it seems quite logical and common sense that if you get a phone from someone that you have to pay them for it.
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.
When information is power, privacy is freedom.
I just read through it, and T-Mobile's deal is basically a 0% APR loan with a down payment and fixed $20/month payment, on top of your monthly service charge, for however long it takes to pay off the principal (depends on the price of the phone).
Any competent lender is going to provide you with a contract which spells out what happens when the loan ends, what happens if one or both parties terminate early, etc, and in T-Mobile's case, the loan is contingent on maintaining carrier service, and the remedy is full payment of the balance. Otherwise, people will just quit and get a $600 phone for the price of a $99 down payment.
Similarly, most new auto loans may be contingent on maintaining a service of some sort, like full coverage insurance. I think Washington State's AG has his head firmly implanted betwixt his butt cheeks, since any non-retard should easily tell the difference between the pay up front no-contract, month to month deal, and the other one which includes all kinds of disclosures as to the fact they're agreeing to a loan... But whatever.
Constitutional rights may be respected, repealed, or modified; but they must never be ignored.
Many consumer product installment payment contracts have similar accelerated payment clauses which can be triggered by loss or damage to the product, changes in borrowers financial status (miss a payment and it all comes due, for example), etc.
This is a product installment payment contract for a phone you are buying. It is not a cell phone service contract.
I don't read your sig. Why are you reading mine?
You can't drop the T-Mobile service and just keep paying off the phone in $20 installments? I would have assumed you could... and I guess that must be what the AG is upset about.
"[Regarding the 'cloud,'] ownership was what made America different than Russia." -- Woz
You're missing the point. Take my case: before switching to T-Mobile, I bought five nexus 4 phones at about 300 a pop. T-Mobile let's me put then on their service for $110 a month for all five lines fully unlimited, and no need for a contract. That's dirt cheap. At&t not so much. At&t I bring my nexus phones over, I still pay as if they subsidized it, which is upwards of $250 a month, AND a have to agree to a two year term. This is where T-Mobile wins, and they shine too.
Thus AG who is complaining about T-Mobile is either a moron or a shill. The later wouldn't surprise me because many politicians are known for granting favors to larger communications providers, and I'll bet that if you look into his campaign finances, there's probably a sprint, Verizon, or at&t line item in it.
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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.
Sure, but TMobile has loaded their propriarity remix on android on the phone as well, and they charge for that (depsite the fact that you may not want it and are likely to root the phone as soon as you get home anyway...) Oh, and the crapware they make you pay for too. But in all seriousness, T-Mobile is acting as a reseller and there is no way of knowing what google charges them wholesale for the Nexus 4. PLUS google isn't offering the 0% financing as an incentive. (think of the interest as already being rolled in to the purchase price.) Sure you can get it just by driving over to your nearest Google store.... oh, wait, I forgot, they don't pay brick and mortar overhead. All I'm saying is, yes, you can get it cheaper direct from the source. T-Mobile is not the source and they are expected to mark it up. Maybe marking it up by just over 50% is a bit much, but depending on the retail establishment I've seen markups as much as 150%. All that aside though, the thing about T-Mobile's approach to this that is so different from the other big carriers is the fact that you DO have the option to buy one from Google, and pay less on your monthly bill because of that. ATT, Verizon, et al are going to try to charge you the same thing, regardless of if you get the phone from them or from Google. tl;dr- T-Mobile is a reseller, Google is the source. Expect to pay more if you're not willing to put in the legwork.
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