T-Mobile bills itself as the ”un-carrier” network that’s rocking the US wireless industry—ripping up service agreements and eliminating hidden fees. But a new lawsuit suggests that it’s a lot more like its competitors than it lets on.
The lawsuit, filed by a T-Mobile customer on April 15 and seeking class-action status, alleges that the company’s no-contract plans are deceptive. T-Mobile says the plans don’t have hidden fees, but there’s an early termination catch the company isn’t being forthright about, according to the lawsuit. Customers who terminate their services have to pay for the phones they bought from T-Mobile outright, even if they agreed to pay for them in installments.
Customers who buy phones and corresponding no-contract plans through T-Mobile buy into two separate agreements: a month-to-month agreement to buy the phone service and another to purchase the actual device, which can be paid in installments. But when a customer ends their service, they’re billed for the full cost of the device.
Moshe Farhi, the T-Mobile customer who filed the lawsuit, says T-Mobile never made that clear to him. Here’s what happened:
Last June, he got four phones, for himself and his family, and signed up for a month-to-month service plan through T-Mobile. The phones cost $2,600, which he agreed to pay in 24 installments, as part of a loan that originated from a company called WebBank. T-Mobile immediately took over servicing of the loan, and told Farhi in a letter that the established terms and pay-off dates would not change.
Three months later, in October 2015, Farhi canceled his service with T-Mobile and was promptly billed by the wireless carrier for the $2,270 he still owed toward the devices. The lawsuit alleges that T-Mobile charged Farhi for the full cost of the phones to punish him for canceling his service.
“T-Mobile leveraged his device agreement to essentially penalize the plaintiff for terminating his service agreement,” the complaint says. “Acceleration of the entire amount owed under plaintiff’s device agreement upon cancellation of his service agreement was neither expressly nor impliedly authorized by the parties.”
According to the court documents, Farhi continued paying T-Mobile for the phones each month, based on the terms in the device agreement.
The lawsuit argues that T-Mobile violated Florida consumer-collection laws and the state’s deceptive and unfair trade act by demanding full payment for the devices before it was due, and calls on other Florida residents with the same problem to come forward.
T-Mobile filed a motion to compel arbitration on April 22. It says the device agreement’s fine print clearly stated that Farhi’s loan for the phones would be in default if he did not keep a T-Mobile service plan for them.
In December, New York Attorney General Eric Schneider also began looking into whether T-Mobile falsely advertised its no-contract system, following a complaint from a consumer-advocacy group.
T-Mobile CEO John Legere said at the time that the company sticks by its ads.
Update (1pm ET): T-Mobile declined to comment because court proceedings are ongoing.
No-contract plans have rippled out across the wireless industry since T-Mobile introduced its “un-contract” option a year ago. Since then, rivals like AT&T and Verizon have moved away from two-year service agreements and started charging customers on a month-to-month basis for their services and devices, much like T-Mobile.