California Consumers Fight Back Against Early Termination Fees
By Robert J. Boumis
Early termination fees or ETFs occupy a changing place in American law. In some districts and ETF lawsuits, it has been ruled that early termination clauses in home security and payment process contracts are illegal. California consumers have more recourse than most, particularly against security companies like ADT and payment processors like Wells Fargo, Bank of America and PNC.
Two kinds of early termination fees are employed by many service providers. These include the flat-fee ETF and the percentage ETF. Typically, a flat-fee early termination fee consists of a payment of several hundred dollars to end your service contract. Some service contracts also have percentage-based early termination fees. In these fees, consumers have to pay a pro-rated fee based on the amount of time they have left in their contract. And these two types of fees are not mutually exclusive. A service contract may employ both types of early termination fees in the same instance.
Consumer advocates argue that early termination fees for various services are an anti-competitive measure. The argument holds that early termination fees are not designed to cover the cost of terminating service, which often costs very little to the company in and of itself. Instead, the theory holds that ETFs are designed almost solely to discourage consumers from switching to other service providers. This prevents consumers from making choices about their services based on merit, since these fees negate any savings that could be obtained by stitching to a superior service provider.
Additionally, ETFs can punish consumers for extenuating circumstances. For example, a customer may lose their employment, or move suddenly to an area where the service provider no longer works for them. In these cases, early termination fees punish consumers for circumstances beyond their control, a situation many see as unfair to the consumer.
In California, various early termination fee lawsuits have resulted in awards of millions of dollars in settlements to consumers who were forced to pay early termination fees. In a recent lawsuit, it was alleged that home security giant ADT’s early termination fees violated the California Consumer Protection Act. In this particular case, it was found that ADT raised their monthly fees while keeping most customers with the company with an early termination fee. ADT’s counsel argued that early termination fees constitute a common business practice. However, this in and of itself does not prove a practice is legal. Similar class action suits have netted millions for consumers from companies that employed early termination fees.
If you are a California resident and have paid an early termination fee to ADT or a payment processing company like Wells Fargo Merchant Services, Bank of America Merchant Services or PNC Bank Merchant Services, you may be entitled to compensation. In order to figure out where the matter stands, you can visit the California Early Termination Fee (ETF) Class Action Lawsuit Investigation. Here, you can enter your information for a free legal review by a lawyer specializing in this type of legal action. This initial consultation is free of charge. From here, you can receive guidance on the next steps to take in your specific situation.
Updated May 27th, 2013
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