tmobileiphonepreorderThe way T-Mobile USA is touting its shift away from wireless contracts has Washington state Attorney General Bob Ferguson seriously irked.

So much so, in fact, that Ferguson demanded that the carrier, which has its U.S. headquarters in Bellevue, fix its “deceptive advertising” campaign for the new “Uncarrier” plans, which promise no contracts and no commitment.

“As Attorney General, my job is to defend consumers, ensure truth in advertising, and make sure all businesses are playing by the rules,” Ferguson said in the press release. “My office identified that T-Mobile was failing to 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.”

T-Mobile’s new Simple Choice Plan separates the cost of wireless service from the purchase of a phone — no longer subsidizing the cost of the device as part of the service plan. On the plan, customers can either pay for the phone upfront or via monthly payments.

bobfergusonHowever, Ferguson claims that T-Mobile failed to communicate to customers that there is some type of “commitment.” Indeed, T-Mobile users must pay the full balance on a phone in the case of early contract termination, which is stated in the fine-print of user agreements.

Ferguson said that customers who cancel their 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.”

A court order filed by Ferguson was signed today by T-Mobile, who has agreed to stop advertising the new plans as ones with no restrictions. The company also agreed to clearly disclose to customers that they’ll need to pay full price for their phone if they leave early.

Also, customers who entered into the new service plan between March 26 and April 25 will be offered full refund for devices and be  allowed to cancel plans without paying the remaining balance.

T-Mobile rolled out its new plan at a big rebranding event in March, with CEO John Legere blasted T-Mobile’s wireless rivals for their billing methods.

It’s part of the company’s mission to change the way consumers think about wireless service, and shake up its own business in the process. T-Mobile outlined the new strategy earlier this year and explains in this FAQ:

“Just like all other wireless carriers, T-Mobile has to charge enough to cover the cost of the phone. The difference is that, with Value Plans, T-Mobile separates the cost of the phone from the cost of the service. That means T-Mobile Value Plan customers finish paying for their phone as soon the actual cost is paid off—and their monthly bill automatically drops.”

We’ve reached out to T-Mobile to find out more and will update the story when we hear back.

Previously on GeekWire: T-Mobile customers wait in line, swap Androids for iPhone 5

Comments

  • http://blog.CascadeSoft.net @CascadeRam

    This seems like a fairly absurd lawsuit.

    There is no contract for wireless service.

    They also have an offer where customers can buy a $599 phone with a $99 down-payment and $20/month monthly payments. It is reasonable for T-Mobile to limit this offer to T-Mobile customers.

    I don’t see why customers would be misled into thinking that they can get an interest-free loan from T-Mobile without being T-Mobile customers.

    • Andrew

      Very simple. At other careers you can replace your phone more often than once in 2 years, without paying the remaining balance. Plus, termination fee is less than the remaining balloon payment here. Plus, the cost difference between Value and Classic plans used to be around $10-$15 while now they want $20 for the same kind of commitment.

      So, all in all, TMo is doing pretty fine here )))

      • http://blog.CascadeSoft.net @CascadeRam

        Your comment is very misleading. Of course, other carriers let you replace your phone within a year as long as you pay full price for the new phone and continue to pay the premium monthly payment for the old phone.

        What is even worse is that other carriers continue to charge you for the phone subside long after the phone is fully paid for (and long after the 2-year contract is over). It is strange that no one notices this.

        It is too bad that the new AG wants to force T-Mobile to offer interest-free loans to non-T-Mobile customers, but he doesn’t care about how other carriers fleece their own customers with never-expiring monthly payments to compensate for the one-time phone subsidy.

  • http://twitter.com/Vroo Vroo (Bruce Leban)

    Part of the agreement is that T-Mobile must “More clearly state in all advertisements the true cost of telephone equipment….”

    How about requiring that all carriers do this? The standard up until now was to not disclose either the “true cost” of the phone or what customers were actually paying above and beyond the true cost when they didn’t get another “free” phone.

  • Joe

    TMO SUCKS!! EVEN IF IT’S $10 A MONTH CHEAPER, YOU GET WHAT YOU PAY FOR.

  • bizdevguy

    Ridiculous. Pretty clear on all the phones: monthly payment for 24 months or pay in full at checkout. You can cancel the cell plan at any time and just keep paying for the phone, which is much less expensive than the plan.

    Elsewhere they say “T-Mobile keeps phone costs and plan costs separate.”
    Seems pretty clear to me.

  • jimbo

    I agree. I just purchased a phone from TMO and the salesman mis-represented what would happen if I canceled. I asked him “if I cancel, then I just continue to pay the $20/month until the phone is paid off then”, to which he replied “yep”. They also had outdated contracts that he made me sign and just crossed off the parts stating that there was a contract. There is insufficient training and outdated paperwork when you sign up.

    With that said, I have no plans of canceling, love my new phone, and think the new strategy is great! They just need to fix their communication and paperwork problems.

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