T-Mobile shook the wireless industry when it promised to a “No contract” system for customers. But now labor and consumer protection group Switch to Win has accused T-Mobile of tying customers to a different two-year contract – and of charging high fees from people who switch wireless providers before this two-year period has expired.
Historically, the big four carriers all offered the same type of base cellular plan: if customers agreed to sign a two-year service contract, they could get a huge discount on their phones – so a $ 650 smartphone would be may only cost about $ 200 more front side. Carriers made the difference by charging higher monthly service fees and making it difficult (and costly) for customers to switch to another provider.
This old system was bad for consumers for several reasons. First, people who kept their cell phones for more than two years continued to pay the higher monthly service charges long after they paid off the full phone bill. Second, those wishing to switch wireless service providers before the end of their term in office had to pay “early termination fees” of up to $ 350.
T-Mobile offered a simple solution: customers could pay for their cell phone service and their cell phone separately. In this way, T-Mobile could offer significantly lower monthly service fees and customers would not get stuck in a two-year service contract.
The catch? T-Mobile also offers a “device installment plan” in which customers can pay for their phone in monthly installments. For example, you can either buy or pay for an iPhone for $ 650 $ 27.09 per month for 24 months.
When you sign up for a “device installment plan”, you sign a different type of contract: a contract that governs how you pay for the device. Leave T-Mobile before you’ve paid the full phone bill and the carrier can send you a bill for the rest. With many smartphones exceeding $ 600, customers who cancel their device installment plans can end up paying more than the traditional $ 350 early termination fee.
Additionally, Change to Win claims that T-Mobile is aggressively sending debt collection agencies to customers who have been billed. “Consumer complaints suggest that T-Mobile is improperly sending bills to debt collection agencies and using practices that make it difficult for customers to challenge their debts.” the group writes. “The company’s fraudulent marketing of its no-contract service plans can add to customer confusion and vulnerability to default, making T-Mobile’s inadequate collections and debt settlement processes particularly troubling.”
As a result, Change to Win has asked regulators to investigate T-Mobile for “fraudulent advertising” and “abusive debt collection practices”. USA today Reports that New York Attorney General Eric Schneiderman is investigating the complaints and broadcasting by Change to Win a list of allegations to the Consumer Protection Office.
The consumer protection group Public Citizen supported the call to investigate T-Mobile. “This report should be a wake-up call for regulators and customers,” said Susan Harley of Public Citizen said in a statement. “The time has come to look at these charges to ensure that T-Mobile’s more than 61 million cellular customers are not being exploited.”
T-Mobile didn’t respond to Money’s request for comment, but T-Mobile CEO John Legere did leave a comment in response to that USA today Story on Twitter and says he stands by the forwarder’s “no-year contract” ads.
What You Should Know: When you purchase a device rate plan, you are entering into another contract and may not be able to leave T-Mobile early without paying a penalty. But T-Mobile offers good tariffs. Money named T-Mobile’s Simple Choice Plan one of the The best mobile phone tariffs 2015. So if you want to try the T-Mobile service but want the option to switch carriers, consider buying the phone outright – it’s expensive, but you own your device and you can always leave it.