consumer tips from attorney general

8/4/2019 Consumer Tips From Attorney General

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Attorneys at Law

1700 U.S. Bank Plaza South220 South Sixth Street

Minneapolis, MN 55402

Office: 612.339.4295 Fax: 612.339.3161

www.mansfieldtanick.com

MEMORANDUM

TO: Seth Kaplan, FOX 9 News

FROM: Greg Perleberg

DATE: October 5, 2011

RE: Mobile Telephone Contracts

Greg Perleberg is a Partner at the Minneapolis law firm Mansfield Tanick & Cohen, PA.Greg is a Business Law attorney, specializing in the areas of intellectual property, technology, e-commerce and entertainment law. He is also an Adjunct Professor at the McNally Smith Collegeof Music.

CONSUMER TIPS FROM THE

OFFICE OF THE MINNESOTA ATTORNEY GENERAL

http://www.ag.state.mn.us/consumer/ylr/wirelessphones.asp

http://www.ag.state.mn.us/consumer/consumertipscellphones.asp

Be aware that some carriers may unfairly attempt to use even the smallest changes toyour wireless service plan such as adding or decreasing minutes or text messages, amonthly discount applied to your bill, or upgrading your phone to renew or create anew one to two year contract. Make sure you investigate before making any changes toyour wireless service plan.

When you receive solicitations from your cell phone provider in the mail or via e-mail, besure to read the fine print. Acceptance of these offers may require an extension of yourexisting contract or creation of a new contract. Also, when solicited by telephone, verifywith the representative whether acceptance of the offer will renew or create a new

contract. Get written verification of the changes made to your plan and that there hasbeen no contract extension.

Keep in mind that when you make changes to your wireless service plan, you may notactually sign a new contract. Rather, the company may try to consider your use of thephone as your binding agreement to the terms set forth in its contract.

Check your bill every month to ensure that no unusual charges or discounts are beingapplied to your bill. Furthermore, if the bill shows the contract beginning and end dates,
http://www.ag.state.mn.us/consumer/ylr/wirelessphones.asphttp://www.ag.state.mn.us/consumer/ylr/wirelessphones.asphttp://www.ag.state.mn.us/consumer/consumertipscellphones.asphttp://www.ag.state.mn.us/consumer/consumertipscellphones.asphttp://www.ag.state.mn.us/consumer/consumertipscellphones.asphttp://www.ag.state.mn.us/consumer/ylr/wirelessphones.asp


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check to make sure that your contract end date has not changed. If something is not righton your bill or if your contract has been extended without your consent, contact yourwireless service provider immediately.

Any time you make changes to your service plan, you should ask your wireless providerfor a copy of your contract and any other documents that may govern your agreementwith your wireless provider. These documents will often set forth what changes thecompany believes may impact your contract duration.

Be sure to investigate what steps you need to take to end or continue your service at theend of the contract. In some cases, the contract may be automatically renewed unless youcontact the company to terminate the service.

IF YOU BELIEVE YOUR CONTRACT HAS BEEN WRONGFULLY EXTENDED OR A

NEW CONTRACT WRONGFULLY CREATED, CONTACT THE MINNESOTA

ATTORNEY GENERALS OFFICE AT 651-296-3353 OR 1-800-657-3787 OR AT

WWW.AG.STATE.MN.US FOR HELP.

LEGISLATIVE HISTORY

The "Cell Phone Consumer Empowerment Act of 2007," sponsored by Senators AmyKlobuchar (D-MI) and Jay Rockefeller (D-WV), would have given customers 30-days to canceltheir cell phone contract; mandate that carriers pro-rate termination fees and require that carriersnotify customers if any service upgrades would trigger a contract renewal. Seehttp://www.govtrack.us/congress/billtext.xpd?bill=s110-2033.

BECAUSE THIS BILL WAS INTRODUCED IN A PREVIOUS SESSION OF

CONGRESS, NO MORE ACTION CAN OCCUR ON IT.

Senators Richard Blumenthal (D-Conn.) and Al Franken (D-Minn.) on Tuesday introduced abill that would ban wireless carriers from using contract clauses that strip users of rights to sue incourt. The Senators proposed Consumer Mobile Fairness Act comes after the SupremeCourt decision last August to uphold the use of the mandatory arbitration clause.

The Federal Communications Commission (FCC) has proposedbut not acted ona billshock rule that would require carriers to notify consumers once they get close to monthly data,

text and voice minutes. Last October, Verizon admitted to charging 15 million customers morethan $50 million for data services they did not intend to use.
http://www.govtrack.us/congress/billtext.xpd?bill=s110-2033http://www.govtrack.us/congress/billtext.xpd?bill=s110-2033http://www.govtrack.us/congress/billtext.xpd?bill=s110-2033


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KEY ISSUES

Many cell phone users do not know when their contracts end, and very few of them know thespecifics of their legal rights.

END-USER AGREEMENTS: A contract of adhesion is when the agreement it is drafted by aparty that has superior bargaining powers, and uses that leverage to write the agreement to theiradvantage (a "take it or leave it" deal). Generally enforceable (similar to website agreements,software licenses, etc. clickwrap, shrinkwrap, etc.) unless unconscionable (e.g., severepenalty provisions, very small print, etc.). Most businesses would never conclude theirvolume of transactions if it were necessary to negotiate all the terms of every consumer

contract.

LATE FEES: Currently limited relief for consumers; Waiting for either the Courts or the FCC todetermine who is going to regulate (the FCC is in favor of nationwide uniformity; The FCCChairman has said he favors a single national rule that would require early termination fees to

shrink over the course of a contract). Most complaints are based on high rates that wirelesscompanies use to compute late fees. According to the Better Business Bureau, wirelesscompanies have received the most or second-most consumer complaints compared to otherindustries every year since 2003.

CELL PHONE JAIL & EARLY TERMINATION FEES (ETFS):

Consumers are locked into contracts (cannot switch when a competitor offers a betterdeal).

Most phones sold in the U.S. are also locked into the carrier that sold them; certaincountries require mobile phones be sold in an unlocked state; Prices for an unlocked

iPhone can range from $400 to $700.A way for wireless companies to subsidize expensive mobile telephones (e.g., $50 for a$350 phone).

o A reasonable fee to recover the cost of cell phones, which wireless companiessubsidize in exchange for customers signing up for long-term contracts.

Form ofLIQUIDATED DAMAGESo Usually range between $175 to $200.o Wireless companies subsidize the telephone in exchange for revenues from

contract for years to come.o However, EFTs often much higher that the actual lost profit the wireless

company suffers.

Right to opt-out of mandatory arbitration.


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MANDATORY ARBITRATION: U.S. Supreme Court upheld the use of the mandatoryarbitration clauses. Prevents customers from pursuing their claims in court.

First introduced as a cheaper, speedier substitute to litigation in court, manydisadvantages:

o Limits liability.o The big companies represent repeat business for the neutral arbitrators and,

therefore, there may be a bias (either conscious or unconscious) in favor of thecompanies; arbitrators are generally privately paid.

o The little person is (theoretically) on equal footing with the giant corporation ina court of law, with a jury of his or her peers. The binding arbitration playingfield is far more skewed in favor of big business.

o The consumer is potentially waiving all of their legal rights (e.g., due process)ifconsumer makes a single procedural mistake or misses a deadline, the arbitratormay automatically rule in companys favor.

oLimits class action lawsuits, which may be the only practical remedy for plaintiffswith small claim amounts.

o Time, energy and stress for a consumer to pursue an arbitration claim.o Pro-consumer advantages not having intended effect only a very small number

of claims are ever filed.


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SOLUTIONS FOR CONSUMERS

Currently five ways consumers can legally get out of a mobile telephone contract (OPTIONS #2,#3 and #4 are NOT necessarily great choices):

1.

Adverse Material Change If the wireless company makes a unilateral, adversemodification. For example, wireless companies cannot raise the price of their servicesunless the consumer agrees, or change other important elements of the service If so, theconsumer is free to reject the contract.

2. Move Outside the Coverage Area In todays world, this is nearly impossible.3. Death4. Join the Military Servicemember's Civil Relief Act (SCRA)5.

Contract Transfer In most cases, consumers are free to transfer their contracts tosomeone else (most wireless companies allow this after doing a credit check on theproposed new customer; also allows consumers to get a wireless telephone without anactivation fee). Websites to facilitate transfers of cell phone contracts:

TRADEMYCELLULAR:www.trademycellular.com

CELLTRADEUSE:www.celltradeusa.com

CELLSWAPPER:www.cellswapper.com

CELLCLIENTS:www.cellclients.com
http://www.trademycellular.com/http://www.trademycellular.com/http://www.trademycellular.com/http://www.celltradeusa.com/http://www.celltradeusa.com/http://www.celltradeusa.com/http://www.cellswapper.com/http://www.cellswapper.com/http://www.cellswapper.com/http://www.cellclients.com/http://www.cellclients.com/http://www.cellclients.com/http://www.cellclients.com/http://www.cellswapper.com/http://www.celltradeusa.com/http://www.trademycellular.com/


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SUGGESTIONS FROM GREG WHEN CHOOSING A CELL PHONE PROVIDER

WHEN READING THE FINE PRINT

Look for contracts that limit late fees to no more than fair interest rates (e.g., 1.5%

monthly interest rate; 18% annual).

EFTs prorated against the remaining term of the contract, AND based on the value of thedevice.

A trial period to effectively evaluate the service and the device (several providers offer30-day trial periods).

Watch for provisions that automatically renew your contract for an extended term (e.g.,when requesting a change to your service or plan).

Consider a pre-paid phone versus a long-term contract.

Lastly, if consumer finds themselves in the unfortunate situation where that are being contactedby a debt collector related to unpaid cell phone bills, consumers have numerous rights. Forinstance, four criteria must be met in order to bring a claim under the Federal Debt CollectionPractices Act (FDCPA):

1. Consumer debtthe debt being collected must be for personal, family or household use;2. Consumerthe claimant must be an individual as opposed to an entity;3. Debt CollectorFDCPA applies only to collection agencies and lawyers, not the original

creditors;

4. A violation under the FDCPAsee below:Contacting your Relatives or your Workplace and disclosing debt;

Contact before 8:00 am, after 9:00 pm or after you have told them you arerepresented by an attorney;

Use of Harassing or Abusive language, or calls repeatedly throughout the day

Use of False or Misleading Communications, such as threatening legal action orlying about the amount of debt;

Unfair Practices, such as threatening to unlawfully repossess property; andSeveral other violations.

For further questions, contact Greg Perleberg directly at 612.341.1203 or 651.271.7762; [email protected].
mailto:[email protected]:[email protected]:[email protected]

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