Issues that Make Early Termination Fees Unlawful

Issues that Make Early Termination Fees Unlawful

By John Curran

Recurring monthly bills from a company that provides a service such as payment processing or home and business security are supposed to benefit both sides. For the service provider, they can create a stream of revenue for years to come, while users should be able to lock in a rate and get the protection or business help they deserve. Some people are wondering if the users are missing out because of onerous early termination fees.

Recent class action lawsuits over early termination fees (ETFs) argue that these contracts should be covered by the Truth in Lending Act because they cover more than four installment payments. If that is the case, consumer attorneys say these contracts do not accurately mention what costs are involved over the term of a contract that can last years. In the case of one alarm company provider, they say that the front page of the contract lists a monthly fee penciled in, but there is little other information.

That plays a large role in consumers’ other major complaint. A company that has a contract in place in California is entitled to a portion of the money it would have received from a customer over the term of the agreement. That is what usually ends up as an early termination fee. Unfortunately, some plaintiffs say that the amount that is asked for is either arbitrary or too high. A class action lawsuit against the home security service provider ADT noted that company contracts either offered to break the contract for several hundred dollars, or as roughly 75% of the remaining fees.

There are two factors in play. One, contract law enables a party to obtain the lost profit they would have netted as a result of the recurring payments. For ADT to ask for 75 percent of the amount, that would have to be the company’s profit margin on its services. In addition, the flat-fee ETF does not fit, for example, for people who have just a few months left on their contract.

These issues do not just concern home security companies, however. Payment processors may also have vague language about fees to break a contract, and there are  legal questions about whether or not actions by a company has given a consumer good cause to terminate a contract without paying up based on the Truth in Lending Act and other statutes.

People who feel like they should not have to pay hundreds of dollars or more in early termination fees should consider getting a free consultation with an early termination fee lawsuit attorney at the California Early Termination Fee (ETF) Class Action Lawsuit Investigation today. You may have a case to seek a refund of the improper fees you paid.

Updated May 20th, 2013

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