Verizon doubles early cancellation fees
Verizon is to double the fee it charges customers to cancel their service contract. The change may be designed to deter buyers from getting a subsidized phone upon release and then selling it at a profit.
At the moment, a customer who wants to cancel their contract before its scheduled completion date (usually two years) must pay a $175 early termination fee. From Nov. 15 that goes up to $350. The policy affects “Advanced devices”, a term which hasn’t been specified, but likely covers most smartphones.
In what appears to be a change, the fee will now drop by $10 for each month of the contract that has gone by. That could be good news for some customers as it now means it will be cheaper to end a contract after the 18-month mark.
It appears the most likely reason for the change is to make it less worthwhile for customers to get a new handset solely for the purposes of immediately canceling the contract and selling the phone on at a profit (but for less than its unlocked price). That had become a particular concern thanks to a recent offer allowing Verizon customers to buy two BlackBerry Storm 2 handsets (each with a service deal) for the price of one.
It’s somewhat surprising it has taken so long for the early termination fee to get to this point. At $175 there were certainly some handsets where profits could be made by early cancellation, albeit often too small to be worth the hassle, particularly given that each time you do it you chalk up another credit application on your record).
And even with the $175 fee plus the first month’s service charge, Verizon could still be out of pocket in some situations given the subsidy it pays manufacturers. At $350 it’s much less likely people will find a way to make a quick buck and, even if they do, Verizon usually wouldn’t be out of pocket.
The big downside for customers is that if you find a handset isn’t to your liking, or are disappointed with the service provided by a network, it’s now much less likely you’ll be able to afford to get out of the deal before its scheduled conclusion.
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