Cellphone Contracts Cause Angst
Clarified 7/6/07. Consumer lawyer David Marshall is not familiar with the details of Kerry Folan's case, as a previous version of this story may have implied.
When Kerry Folan upgraded her Verizon Wireless plan to get more free minutes for the same price, she didn't realize she was also extending her contract.
"I was not told this at the time I agreed to the change and I did not sign a new contract," says Folan, an editor in Brooklyn, N.Y. She wondered whether the contract extension was legal.
Folan is one of many unhappy cellphone customers. The Better Business Bureau, a nonprofit, reports receiving over 28,000 complaints about the industry last year, making it the most complained about sector. Joseph Farren, spokesman for CTIA - the Wireless Association, says the number of complaints is small compared with the number of satisfied customers. The total number of wireless subscribers in the United States exceeds 230 million. "The wireless industry is enormously competitive; that puts the consumer in the driver seat," he says.
Contracts, though, often make customers feel like kidnapped passengers instead. Gail McGovern, professor of management practice at Harvard Business School, says companies don't want to make customers unhappy, but they often fall into the habit of poor customer service. Contracts, she says, take advantage of the fact that customers have a difficult time predicting how much they will use their cellphones.
As for Folan, consumer lawyer David Marshall, without knowing the details of her particular case, says she's probably out of luck. Her contract extension was most likely legal. Companies usually disclose the details of the contract extension somewhere on their websites or in the original contracts' fine print.
But just because it was legal doesn't mean it was good customer service. According to Tom Pica, spokesman for Verizon Wireless, renewing a contract because of an upgrade is standard practice—but something that should have been explained to the customer. He says the company also sends customers a letter within 10 days of having their contract extended, spelling out the terms of the new contract and giving them 30 days to cancel it and return to the previous contract. (Folan says she doesn't remember receiving such a letter.)
"We explain to a person whenever they make a change that would extend their contract," says Pica. "If it didn't happen, it should have."
Pica adds that customers can also choose prepaid plans that don't require long-term contracts. Most customers, however choose to sign contracts because they often come with discounts on mobile phones. "Contracts enable us to subsidize the phone upfront and recoup the investment over the life of contract," explains Pica.
Folan's story may yet have a happy ending. Verizon offered to look into Folan's case history to see what happened.
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