The FCC received over 3700 complaints about early termination fees. FCC Kevin J. Chairman Martin said that consumers should be protected, while early termination fees can be a legitimate means of recovering legitimate costs and they shouldn't be abused. in an opening statement at the FCC hearing today.
He suggested clear rules that guarantee the following consumer protections:
1. The early termination fee should be reasonably related to the cost of the equipment the consumer receives. For example, a $500 phone shouldn't have the same early termination fee as a $50 phone.
2. The early termination fee should be prorated over the life of the contract.
3. Any contract for service should be for a reasonable length of time.
4. When a consumer renews his contract without receiving new equipment, the early termination fee should not be extended.
5. Finally, consumers should be able to take the phone home and receive their first bill to make sure the service and bill are consistent with what they expected, before an early termination fee kicks in.
Martin believes this set of rules is important to protecting consumers. The issue is growing in importance as the practice of charging early termination fees spreads to other communications industries such as video and broadband.
He doesn’t not believe a patchwork of 50 different sets of regulations with widely varying protections benefits consumers or the industry.
He is concerned that early termination fees are being used not as a means of recovering legitimate costs but as a means of locking consumers into a service provider. He notes that early termination fees shouldn’t function as a hindrance to consumers’ ability to choose, or switch to, the service or provider they want.