T-Mobile Accused by Attorney General of Misleading Consumers
T-Mobile, at a March 26 press event to announce its Long Term Evolution (LTE) network and clarify its new "un-carrier moves," wagged a finger at the press, accusing it of misrepresenting those moves. This week, it was T-Mobile on the receiving end of a knuckles rap for misconstruing details, with Washington State Attorney General Bob Ferguson accusing the nation's scrappy, fourth-largest carrier of misleading consumers regarding the pricing terms of it smartphones.
In March, T-Mobile began selling smartphones for a low up-front cost and two years' worth of low monthly payments. To customers who qualify, high-end devices like the iPhone 5, the BlackBerry Z10 and the HTC One can be purchased for $99.99 down and 24 monthly payments of $20.
Consumers can pair these phones with $50, $60 or $70 Simple Choice plans that, unlike the two-year service agreements required by T-Mobile's larger rivals, come without a long-term contract. A customer can walk away from T-Mobile's service at any time.
T-Mobile CEO John Legere put this point in simple terms at the March 26 event, telling his audience, "If we suck this month, go somewhere else."
But how easily customers can walk away from their device commitment is what concerns Ferguson.
"My office identified that T-Mobile was failing to adequately disclose a critical component of their new plan to consumers, and we acted quickly to stop this practice and protect consumers across the country from harm," Ferguson said in an April 25 statement.
The statement adds that T-Mobile separates its wireless service plans from its phones and says that consumers can bring their own phones or pay the entire cost for a phone up front.
What T-Mobile doesn't adequately disclose is, the statement continues: "The customers who purchase a phone using the 24-month payment plan must carry a wireless service agreement with T-Mobile for the entire 24 months—or pay the full balance owed on the phone if they cancel earlier. Consumers who cancel their wireless service face an unanticipated balloon payment for the phone equipment—in some cases higher than termination fees for other wireless carriers, depending on how early they cancel."
Ferguson's office has charged T-Mobile $26,046.40 in legal fees, for its troubles, and gotten T-Mobile to sign an Assurance of Discontinuance (AOD) agreement.
In the AOD, T-Mobile has agreed not to misrepresent consumers' obligations under T-Mobile's contracts and not to fail to adequately disclose the details of what occurs if a customer terminates his service before his device is paid off.
T-Mobile has also agreed to offer a full refund for telephone equipment and a cancellation of service, with any remaining balance forgiven, to customers who purchased both between March 26 and April 25 and would like out of the deal.
It will also better train customer service representatives to disclose these details and include details about the full terms of walking away from T-Mobile's service in the "Frequently Asked Questions" section of its site.
T-Mobile told eWEEK in a 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, straightforward 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."
At the March 26 event, answering journalists' questions about the terms for the phone, Legere said, "You can leave [T-Mobile's service] without any obligations, except for the phone. But if you're done with the device, you can bring it back to us for Fair Market Value."
He added later, "If you want to leave ... you can keep the contract with the interest-free payments and move on.