Settlement Requires Cell Phone Company To Alter Service Agreements

Following a year long investigation Attorney General Spitzer today announced an out-of-court settlement with a cellular phone company that will ensure that hundreds of thousands of customers in upstate New York are treated more fairly. The agreement, with Cellular One, will fundamentally change the company's business and advertising practices.

The A.G.'s investigation, spurred by complaints from customers, found that Cellular One often misled its customers. Cellular One customers sign 12 or 24 month service agreements and many were under the impression that the terms of the agreement would remain in effect for the entire length of the contract. The investigation by the Attorney General's office found that this was not the case. During the term of a customer's contract, the company would often unilaterally change rates or began charging for a previously free service like voice mail. The company even went as far to change consumers a termination fee of $15 or $25 per month for the time remaining on their service when customers called to cancel their contracts.

Cellular One would also require customers to return or pay for promotional items such as free phones. The agreement with the Attorney General's office will end all of those practices.

"A deal is a deal. It is simply unfair for Cellular One to unilaterally raise its rates during its contracts with customers. Even worse, Cellular One would then punish customers who wanted to cancel their contracts, " Spitzer said. "This settlement ensures that the company will disclose all of its charges up front so that consumers can make an informed choice when choosing a wireless cellular phone service."

The investigation also found that Cellular One offered "free" minutes to consumers but in fact charged network fees on those "free" minutes. The settlement requires the company to clearly and conspicuously disclose when it charges any fees on minutes that are advertised as "free."

The settlement further requires that Cellular One provide an additional benefit to "Peace of Mind" plan customers at an estimated cost of $100,000. Those who signed up for the plan receive 10 free minutes per month for a monthly fee. Without adequate disclosure, the company unilaterally ended the practices of allowing customers to carry over the unused minutes from one contract year to the next. The settlement requires Cellular One to restore 10 free minutes to all "Peace of Mind" plan members and to clearly inform customers of its policies associated with the plan.

The case was handled by Assistant Attorney General Jim Morrissey of the Buffalo Regional Office, under Bureau Chief Barbra Kavanaugh.