AT&T has agreed to pay $18 million to settle claims that it imposed unfairly high early termination fees on subscribers who wanted to end their contracts. The case covers customers who were charged a termination fee from as far back as 1998. Those who can prove they were charged a termination fee during that period could be eligible to receive up to $140. Those who didn’t cancel their contract, for fear of the charge, could still be eligible for an AT&T long distance phone card for up to 200 minutes, or have their current AT&T contract changed from a $175 flat rate to one that is prorated.
Before 2008, AT&T charged a $175 termination fees regardless of the time left on a subscriber’s contract. Now the company switched to a prorated fee structure, so customers who are closer to the end of their contracts are charged less that those who opt out earlier. Early termination fees have been a sensitive subject in recent years. Wireless companies claim they are necessary to recover part of the subsidies paid to discount new phones. But in several lawsuits filed against AT&T and other operators, customers claimed the fees were illegal due to “hidden charges” that discouraged them from switching to rival operators. Sprint agreed to pay $17.5 million to settle a similar lawsuit. The Federal Communications Commission has sent letters to AT&T, Verizon, Sprint, T-Mobile and Google, asking them to explain how they notify their customers about termination fees. The inquiry is part of a broader FCC investigation started last year to determine billing practices in the industry.
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