April 25, 2013 at 4:27 PM ET
When T-Mobile announced a new type of wireless plan last month with “no restrictions,” “no annual contract," and "no asterisks attached," many wondered if it was too good to be true.
Now, some officials say it was.
Washington State Attorney General Bob Ferguson said the company’s ads were “quite deceptive.” He believes T-Mobile’s ads “misled consumers on important details related to their service plan,” because there are “hidden charges” for early termination of these phone plans.
Under this “no contract” program, a customer had to buy their own phone. They could make a down payment and then pay off the balance over a 2-year period.
But here’s the catch: those who bought a phone using T-Mobile’s 24-month payment plan were required to carry a wireless service agreement with the company for the entire 24 months or pay the full balance owed on the phone if service was cancelled earlier. That could be hundreds of dollars.
“This lump-sum balloon payment could well be higher than the termination fees for other wireless carriers, depending on how early the customer cancelled,” said Paula Selis, the state senior assistant attorney who handled this case.
Selis said the company did explain all this “in the so-called fine print,” but she noted the information “was not clearly disclosed in a way that a consumer could understand.”
Ferguson, the state attorney general, said T-Mobile cooperated with his office and has agreed to a court-approved settlement that will require it to immediately stop its current advertising campaign. The carrier also will make refunds for telephone equipment to those who already signed up for the plan – between March 26 and April 25 – who want to cancel.
“This settlement will benefit consumers across the country,” Ferguson said at a news conference on Thursday.
T-Mobile issued this statement:
“As America’s Un-carrier, our goal is to increase transparency with our customers, unleashing them from restrictive long-term service contracts – this kind of simple, straight forward approach is core to the new company we are building. While we believe our advertising was truthful and appropriate, we voluntarily agreed to this arrangement with the Washington AG in this spirit.”
Under the terms of today’s court-ordered settlement, T-Mobile has agreed to:
• Not misrepresent customers’ true obligations under the terms of its contracts for the sale of service or equipment;
• Make clear the consequences of cancelling T-Mobile service, including restrictions or limitations on cancellation; fees and costs; and early termination fees;
• More clearly state in all advertisements the true cost of telephone equipment, including the requirement the customer carry a wireless service agreement for the life of the 24-month financing plan;
T-Mobile will send customers an email telling them they can cancel without penalty and get a refund. This must be done within 30 days of receiving that notice from the company. Those who do cancel will be required to return the phone to T-Mobile at the company’s expense.
Click here for more information on the settlement.