One difference between T-Mobile's term-purchase program and conventional contracts is that after making hardware payments for 24 months, T-Mobile customers can pay less per month if they keep using the same phone. However, for customers who want to cancel service early, the "balloon" payment for the rest of the phone's cost may be even higher than a conventional early termination fee, Sellis said.
Ferguson's office proactively investigated T-Mobile's claims after seeing the ads, without receiving any complaints from consumers that they had been deceived, Sellis said.
Because T-Mobile USA is based in Bellevue, Washington, the state's attorney general can regulate its advertising practices nationwide, she said.
In the settlement, T-Mobile agreed to not misrepresent the terms of its contracts, to make clear the consequences of canceling a plan, to more clearly state the true cost of the equipment it sells and to train its customer service representatives to make full disclosures. Staff have to be trained within 21 days. The carrier also agreed to pay US$26,046.40 in costs and attorney's fees.
Consumers who bought a T-Mobile phone and service under these plans between March 26 and April 25 can cancel their service and get a full refund. T-Mobile will notify those customers by email and follow up with a postcard if the email bounces back, Sellis said. Once they're notified, customers will have 30 days to return their phones, at T-Mobile's expense.