While a lot of people are counting the days to Christmas and New Year's, I'm doing a different countdown.
I have exactly six months to go before I get out of the contract I have with my cellular telephone company.
And I want out bad. This company's billing practices have been horrible. The cellular service can be spotty at times. But mostly I hate the customer service I've received.
So, what's stopping me from jumping to a competitor?
That darn long-term contract my husband and I signed. If it weren't for that pesky early-
termination penalty--$175 for each of the two phones we have--I would have walked out on the company six months into the contract. The $350 is just enough money to keep me on the hook.
From car leases to cell phones to Internet service contracts, consumers often find themselves hooked up to a company for the long haul in exchange for what looks like a great bargain. But signing a long-term service contract--even if the money is right--isn't always a good idea.
For instance, an increasing number of companies are offering "free" computers to consumers. The catch is you have to agree to a multiyear Internet service contract, in some cases as much as three years--often at an inflated monthly price.
"When it comes to these types of business agreements, the consumer is often at a disadvantage," said Frank Torres, legislative counsel for Consumers Union. "For example, you have to take into account that the technology is constantly changing. What consumers are concerned about most is the price and they often don't look at other issues."
My husband and I were certainly driven by the discounts when we signed our cellular contract. It just seemed like a good deal. The longer the contract, the better the monthly rate. We did not think twice about the fact that we would be married to this company for two long years.
Now we're ready for a divorce. Call it irreconcilable differences. They have a different idea of customer service than I do.
"You have to look beyond the price," Torres said. "You have to ask yourself what happens if you want to cancel."
What happens, of course, is that you're stuck--unless you want to pay the company to get rid of them.
Companies argue they charge an early-termination or prepayment penalty to compensate them for the lost business. After all, they contend, consumers freely sign a contract agreeing to pay a certain price over time. It's a legitimate point.
But what happens if the service is bad? The company still expects to get paid even though you're now dissatisfied. And what recourse do you have?
Of course, I could refuse to pay the early-termination fee and take my chances with the courts, say lawyers with the National Consumer Law Center.
That penalty provision in my contract is referred to as a "liquidated damages" clause, according to Elizabeth Renuart, staff lawyer in the center's Washington office.
"In a court of law you could make the case that unless the company suffered actual losses, it's an illegal penalty," Renuart said.
Illegal or not, consumers often find it's more trouble than it's worth to try to get out of the contract, said Margot Saunders, managing lawyer at the Law Center.
Further, Saunders said, consumers could risk hurting their credit rating by refusing to pay or challenging such penalty provisions.
"Companies often include in their contract clauses which might not be enforceable by a court of law, but they know consumers won't pursue it because of the small amount of money involved," she said.
In fact, Saunders found herself in the same situation I'm in. She was unhappy with her long-term cellular phone contract. But even with her legal background, the best she could do was negotiate a smaller penalty to back out of her telephone deal. "I'm a lawyer, but who's got time to go to court for this kind of thing?" she said.
Personally, I'm prejudiced against locking myself into a long-term relationship with a company. In these days of bargain-basement shopping, we all should be mindful that when it comes to long-term contracts, price alone shouldn't drive your decision.
Sometimes it's worth paying more for the privilege of being able to dump a company if it doesn't deliver.
Don't forget, I'm looking for holiday stories on the best gift you got or gave that didn't cost a penny. Send brief entries, including contact information, postmarked by Dec. 13, to Michelle Singletary, The Color of Money, The Washington Post, 1150 15th St. NW, Washington D.C. 20071. Or send your entry by e-mail to email@example.com.
The Fine Print
Long-term contracts for such services as cellular telephones are becoming commonplace. By signing a long-term contract, a consumer is making an obligation to pay for a product or service for a long period of time. It is important to read the fine print before agreeing to the contract so that you know what your obligations are. Before signing an agreement, consumers should get answers to the following questions:
* Does the quoted price include all the incidental fees you may be charged?
* When can you get out of the contract and for what reasons? Is there a penalty for canceling the contract early, and how much will it cost you?
* Can you upgrade the service? If you can, are there additional costs to upgrade? For products such as computers, can you trade in your product for credit against getting a more recent model?
* Is there a mandatory arbitration clause? (If there is one and you have a problem with the company, you may be not be allowed to file a claim against the company in court. Instead you will be bound to use an arbitration system typically set up by the company.)
* What can you do if the service quality is not what you expected? What obligations does the service provider or merchant have to solve your problems?
* As you shop around, ask if it's possible to negotiate down or eliminate an early-termination fee or prepayment penalty. With competition so tough, you may be surprised by what companies are willing to do to get you as a customer.
SOURCE: Frank Torres, Consumers Union legislative counsel