Is it legal for a cell phone company to charge $400 for a shut off fee?

The Early Termination Fee or EFT is the fee you have agreed to pay your mobile phone carrier if you decide to terminate the contract before it expires. The charges vary by provider, service plan and type of phone. In some cases the EFT can be over $300, although some companies have decided to prorate the charge and decrease it over the term of the contract. Other companies have completely eliminated Early Termination Fees.

What does the FCC say about EFTs?

As of now the EFT charges remain legal, although several lawsuits have been settled and companies have been asked to explain their fees to the Federal Communications Commission (FCC). The FCC offers several suggestions to avoid EFT fees and make sure you understand your contract before you sign it.

1. Read and understand your service contract before you sign it. Try to negotiate but get all agreements in writing.
2. Ask if the EFT can be waived. They may do this at least for the first month so you have a chance to ensure you will have good service.
3. Ask the phone company what happens at the end of the contract.
4. If you are switching to a new mobile phone carrier see if they may be willing to pay the EFT charge from your old service.
   Understand changes in your contract, such as buying a new phone, and how the changes can trigger a new contract with another ETF.
5. Consider buying a prepaid phone without EFT charges

Can you fight the EFT charges?

Generally, if you signed a contract and agreed to the terms you will have to pay the termination fees. There are times however, that you could prove the contract is not valid. For instance, if you had to cancel due to poor service some people have had success getting certain companies such as T-Mobile and AT&T to waive the Early Termination Fee especially if you do not have service in your new area.

Members of the armed service who are forced to relocate where there is no phone service may also be able to cancel contract fees. If the carrier changes the terms of the service you may also be able to void the previous contract within a specified contractual period.

Finally, you can force the phone company to provide a copy of the signed contract, although this strategy is less successful now that companies keep information digitally and it can be easily accessed. If none of the above works you might be left continuing the service with only bare minimum options until the contractual period expires.

Legislation could come to improve your options

The good news is that this issue has been building for some time with customers and legislatures becoming increasingly frustrated with cell phone companies. My guess is that eventually this will be a non-issue. Phone companies will move away from early termination fees and find different strategies which are better for the customer.

Unfortunately, until legislation is passed, consumers will be stuck paying expensive termination fees in order to end their relationship with cell phone carriers. Remember however, laws can vary by state. California, for example, has more limited laws concerning the ability of phone companies to charge Early Termination Fees. For example, according to recent court rulings, Sprint or no other cell phone company can charge you early termination fees in California.