"An 'Illegal ETF' Destroyed My Credit. Can I Go To Small Claims Court?"

“Jurgis” writes,

Now that the California Courts have ruled that ETFs are illegal, does Consumerist have any advice for consumers, like me, who have an outstanding ETF debt with a non-Sprint carrier?

I ask because I canceled my 2002 Cingular (at the time) service due to horrible coverage, terrible customer service, and that I had to routinely call every stinking month to have bogus text message spam charges removed. I switched services, and after doing so, Cingular stuck me with a $270 early termination fee, failed to inform me of the fee or that it was going into collections, and next thing I know, I’m in collections for $580. I didn’t find out about this until recently, as I am about to purchase a new car and needed a copy of my credit report.

I initially refused to pay because my cancelling my service was completely justified on my part; the service and coverage I was told I would receive when I signed the contract was NOT at all what I actually did receive. I also refused because their raising of text message fees was a materially adverse change to the contract. Neither Cingular nor their collections drones care.

You can imagine my excitement to hear that ETFs are illegal. I would like to file a suit in small claims against the collections agency and ATT (as successor in interest to Cingular) to recover damages incurred as a result of their sending my account, erroneously, into collections over the ETF AND for attempting to force me to pay a fee which is now known as illegal.

Any advice or leads for advice would be greatly appreciated.

You should obviously talk to a lawyer for real legal advice, “Jurgis,” but for now you might want to break your problem into two separate issues:

  1. You have a collection on your account that you are disputing;
  2. That collection is an ETF, which may end up being illegal banned/voided in your state.

Forget about the legality of the ETF for now; you should file disputes with all three major credit reporting agencies over the $580 collection. The original problem exists regardless of what happens in state or federal court, which is that the company didn’t honor their side of the agreement, then failed to notify you that they were sending it to a collection agency.

As to last week’s news that ETFs are “illegal” in California, Sprint Nextel will almost certainly file an appeal. Additionally, the ruling might not stand if the FCC moves ahead with its industry-backed plan to step in and say states can’t regulate carrier fees. (And if they do, then that might be overturned if states take the FCC to court.) Update: according to outphase, this court’s ruling isn’t binding upon any other court, or even on itself.

Find a local lawyer to ask whether you can take advantage of the ETF ruling, but our guess is for your immediate needs it won’t matter.

That doesn’t mean you can’t try small claims court anyway, though, if you want to claim that Cingular didn’t honor its agreement and that their text rate increase meant you were given the opportunity to legally get out of contract. (Here’s a story of a reader who took this route with a subcontractor and won.)

(Photo: Getty


Edit Your Comment

  1. snazz says:

    since the EFT is from years ago and the law was just passed now, wouldnt an ‘ex post facto’ type rule be in effect for Sprint here?

  2. Norislolz says:

    I’m not well versed in the contract end of cell phones (who is?), but can someone explain to me why the ETF is bad? There seem to be plenty of pay-as-you-go plans- though that Consumerist entry on the credit check with ATT seemed limiting in what options consumers are offered. I know phone companies are sketchy in plenty of areas, but I want to focus specifically on the ETF and why it’s so bad.

    Until companies removed them, I typically went with 1 year contracts and got a new phone every year. I have enough backup phones to last a lifetime. After my contract is up, I search for a new carrier again. I enjoy the minor discount on hardware and I don’t want to spend more on phones. That’s what’s going to happen, right? We’re just going to have to pay way more for phones and plan prices will stay the same since cell phone companies are practically a cartel?

    tl;dr- Why are ETF charges considered so terrible?

  3. acknight says:

    Isn’t it Cingular that they’re fighting, not Sprint? Sprint’s the ones who’re in court, but Cingular’s who sent the OP to collections.

  4. OMG! Ponies! says:

    EFT’s are not illegal. In order to be upheld in court, the carrier must prove that the ETF is liquidated damages and not a penalty fee.

    The California court held that Sprint failed to prove that the ETF was liquidated damages, which was what the issue was.

    Please stop spreading inaccurate information.

  5. BillyShears says:

    Cingular stuck me with a $270 early termination fee, failed to inform me of the fee

    Meh. I’m all for the end (or at least pro-rating of) the ETF, but you know what? As they stand right now they 1) exist; 2) are clearly mentioned in the contract you sign.

    That said, there should be a way out of a contract if your coverage is sub-par, none of this “technically we cover that area so you can’t get out that easily, sucker!” nonsense that currently exists.

  6. howie_in_az says:

    Wait a year and it should roll off of your credit anyway; I think most (if not all) bad things roll off after 7 years. See [www.creditinfocenter.com] for more info on this.

  7. OMG! Ponies! says:

    From the mercury News article:

    But in overruling that decision, [California Superior Court Judge] Sabraw said the jurors appear to have erred in assuming the fees were valid, and she took issue with the way Sprint Nextel determined that its customers owed the fees.

    “Sprint did no damage analysis that considered the lost revenue from contracts, the avoidable costs and Sprint’s expected lost profits from contract terminations,” she said.

  8. Pylon83 says:

    @OMG! Ponies!:
    Well put.

    I haven’t read the opinion (if there is one) or any analysis of it, but first off, if the OP isn’t in CA, it doesn’t carry much weight. Second, assuming OMG! Ponies! is correct, the decision was a fairly narrow one that likely doesn’t affect ALL ETF’s. Finally, since the OP’s ETF was charged in the past, it’s unlikely that the ruling would be made retroactive as to render his ETF invalid/illegal. Perhaps the OP shouldn’t have knowingly broken the contract and then allowed it to go to collections without taking some sort of action to prevent it (arguing that they didn’t live up to their end of the bargain.) My guess is their essentially out of luck at this point.

  9. outphase says:

    Mini legal lesson:

    Lower courts rule on a decision. Higher courts hold a decision. The key difference is that a lower court’s ruling is not binding upon any other court (including itself). A higher court’s holding can potentially be binding depending on jurisdiction and superiority.

    Here, the Superior Court made a ruling on ETFs, and the ruling is not mandatory authority to the other courts. Other courts may use the ruling as a guideline, but the courts are not bound by it by any means.

  10. coren says:

    Did Cingular have a text rate increase six years ago that’s even applicable in this case? Nevermind that the company themselves violated the contract first (I’m no lawyer, but would that remove the other parties obligation to fulfill their end?)

  11. Doc Benway says:

    I will tell you want a lawyer told me years ago. You need to write a letter to the collection agency citing that you dispute the $580 under the Fair Credit Reporting Act. The collection agency is responsible for verifying the accuracy of the debt. In addition, I would request a copy of all correspondence that Cingular allegedly sent you regarding the ETF. It is Cingular’s responsibility to prove to the collection agency and you that they made a reasonable attempt to collect on the debt prior to sending it to collection. If they can’t prove it then the collection agency needs to submit a request to have the negative information removed from your credit bureau files.

    Regarding taking Cingular and/or the collection agency to small claims court. You will be able to do so if after sending the letter the agency doesn’t respond in a timely manner – I believe that is either 30 or 60 days (please look this up for yourself).
    The key here is get in touch with someone at the collection agency and don’t be adversarial. Make sure you make it clear that you want to clear this “misunderstanding” up as quickly as possible. Make sure you get people’s names and mention the people you speak to in all correspondence.

    Last bit of advice – send everything by registered mail with a return receipt and if at all possible get the fax number to the collection agency and send them identical copies via fax.

  12. Pylon83 says:

    While your explanation of precedent is essentially accurate, your explanation of holding vs decision is inaccurate. A holding is simply application of law to facts to reach a result. Lower court decisions have holdings, just as appellate court decisions have holdings.

  13. bohemian says:

    I had success getting out of an ETF and a portion of 4 months back bills with Unicel. Connectivity was horrible. You couldn’t pick up a signal except outside in clear view of the sky or near a window in wood framed structures. Anything else no signal rendering the phone useless. Unicel sold a plan that was supposed to be unlimited local calling but they picked and chose what local prefixes were “local” and what ones were not at random and did not publish this information for users anywhere. They also considered non Unicel owned towers to be roaming so I could be in the middle of town and unknowingly be “roaming” because someone else’s tower was stronger. The phones were set default to roam and nothing about either of these clauses in service were documented anywhere for users or in the contract. So we racked up all sorts of long distance and roaming fees in the middle of town that was supposedly “unlimited local”. I documented all of this and sent it as a formal complaint to the PUC. The PUC told Unicel they can’t do this and arm twisted them to waive the ETF and refund the long distance and roaming fees going back 4 months. The PUC’s stance was this information wasn’t in the contract nor in any of the printed or online materials for customers. I noticed they quit selling that plan in SD a few months later. If his Cingular coverage materially changed or they simply didn’t provide what would be considered reasonable service his state PUC might be able to get him out of the contract. But since it is in collections it might be too late. Certainly an option to look at in his case.

  14. JohnMc says:

    snazz has the most applicable answer. Rarely is a juris decision retroactive. And Congress is prohibited under Art 1, Sec 9.

    The relief the poster seeks would be under the auspicies of the law at the time the action occured. Not under the CA decision.

  15. OMG! Ponies! says:

    Ex post facto has to do with the passage of a law rendering past legal conduct illegal.

    The appellate court did not hold that ETFs are illegal. The appellate court ruled on the propriety of the damages awarded and was concerned with Sprint’s calculation of how it set the ETF.

  16. STrRedWolf says:

    @Doc Benway: I agree with you there. Put up a fraud alert, register-letter Cingular and the collection agency of the problem, give ’em 60 to respond, and if nothing happens sue! Definitely check with a lawyer though. That’s step #1.

  17. sonneillon says:

    If your going to small claims, go with credit slander and say they voided their own contract so you shouldn’t have to go to binding mandatory arbitration.

  18. outphase says:

    @Pylon83: My Legal Skills professor be damned! Thanks for the correction.

  19. SonicPhoenix says:

    If this happened in 2002 and it’s now 2008, doesn’t that mean that there’s only one more year where this will be on his credit report? (6 years have passed and things roll off your report after 7 years) I would probably just sit and wait it out rather than cause myself the iritation of dealing with all these people again.

  20. dmuth says:

    Wait, how did $270 become $580? Did I miss something?

  21. @SonicPhoenix: Sometimes people are in collection for months upon MONTHS before it hits their credit report… the later the debt is reported to the Bureau’s, the longer it stays on. My cousin is in the midst of figuring out how to get something removed from her credit report, because the collection company posted a bogus $40 payment to reset the clock on that statute. What would of been falling off her report this year, is on there for another 5 years. She has disputed it, but of course, Credit Bureau’s don’t actually “investigate” like they say. They call up the reporting collection company and “validate” it, which could be as simple as “Does so and so owe this? Ok, right-o”. It’s a twisted, f*cked up system.

    My route would be to write a letter to the collection company, cingular, all Credit Bureau’s, and explain the situation with a nice CC: at the bottom listing everyone else who received the letter. Even put a CC: to the CEO of AT & T, along with the article shown on the Consumerist. The more people, the BETTER. (along with delivery confirmations and such)

    I’ve gotten about 5 things dropped on my credit report for either false reporting, incorrect reporting, or a just local companies feeling they can access my report without my permission. It does work, though it’s time consuming.

    If no answer from the company, or not the answer you’d expect… you have paperwork to show the court that you tried to resolve this problem without taking the court’s precious time.

    Godspeed, Jurgis.

  22. dieselman8 says:

    Consumerist, I enjoy this blog, but sometimes it sickens me how you misinform the public about certain case rulings and what they hold. “ETFs are illegal” is just one of many examples I can point to.

  23. dieselman8 says:

    Consumerist: Also, I can’t help but also notice that your understanding of Trademarks law, particularly with regard to Monster cables, is incorrect. Now, I’ll admit I too hate Monster for it’s ridiculous price markups and frivolous lawsuits as much as the next guy, but when it comes to all your posts about Monster’s trademark lawsuits over consumer confusion, you don’t have it quite right. (i.e. “Lawsuit: Monster Cable Thinks You Might Confuse Mini-Golf With Overpriced Cables”).

    So, let me take a moment to educate you:

    In virtually all Trademark disputes, the issue being disputed is NOT whether consumers will mistaken one product for another (i.e. monster cables for mini-golf), it’s whether consumers will confuse the defendant’s products as to source or sponsorship. (i.e. whether Monster cable is sponsoring or authorizing use of it’s name on mini-golf).

    Come on Consumerist, do you think they really would have filed suit alleging that consumers are confusing mini-golf with home theater cables?