Sprint To Pay $17.5 Million For Early Termination Fees

In a move that may help it move beyond consumer litigation, Sprint Nextel this week said it secured preliminary court approval for a $17.5 million nationwide settlement over the carrier's early termination fees.

U.S. District Judge Jose Linares in New Jersey federal court said the settlement doesn't include the California case where a judge ruled the carrier had to pay $73 million over its cancellation fees. A settlement would potentially derail a nationwide $1.2 billion class-action lawsuit that charges Sprint's early termination fees -- or ETFs -- violate several state laws.

Scott Bursor, the lead attorney in the class-action suit, said he isn't happy with the potential settlement, which would be doled out in cash, credits, and vouchers. He said he may submit a filing with the New Jersey federal court to block the settlement, which would receive final approval in March 2009.

Sprint has recently changed its policy for canceling service before a contract is finished, and the $200 fee now decreases by $10 per month beginning in month six of the contract. The adjusted cancellation fee only applies to new contracts, but existing subscribers can get it by renewing their service agreement.

All of the major U.S. wireless carriers have ETFs, and many of them have faced multimillion-dollar lawsuits over them. These fees remain a contentious issue in the industry, and many consumer advocates say they are overly punitive and limit choice. The majority of U.S. subscribers get their handsets subsidized, and mobile operators argue the cancellation fees are necessary to recoup those costs.

The issue has even caught the eye of the Federal Communications Commission, and outgoing chairman Kevin Martin said he favors a nationwide policy for cell phone cancellation fees.