The Consumer Protection Act and Cell Phone Contracts

What is Bill 35?

On September 15, 2012, Bill 35, The Consumer Protection Amendment Act (Cell Phone Contracts), comes into effect. Bill 35 amends The Consumer Protection Act to add new consumer protection laws to provide for fair and clear cell phone contracts. These new laws include changes to contract format and content, renewals and amendments, termination fees, warranty procedures, and advertising.

What do the new cell phone contract laws mean to me as a consumer?

MTS and its partners have always strived to ensure customers entering into cell phone contracts clearly understand the terms and conditions associated with their cell phone service. The new laws address:

• Improving understanding of content within a cell phone contract when customers sign the contract.
• Improving understanding of when cell phone contract terms can be changed and how a cell phone service provider must communicate these changes.
• Calculating termination fees based on the value of the hardware provided for free or at a reduced cost with the cell phone contract.
• Advertising prices associated with cell phone services to ensure they include any mandatory additional fees like Wireless Network Charge, System Access Fees and E911 charges.

What changes will customers see to an MTS cellular contract effective September 15, 2012?

MTS is making some adjustments to the way information is presented on our contracts for September 15. Some of the changes include:

• Showing the Minimum Monthly Cost – the price for all of the base services included with your plan and any mandatory monthly fees
• A detailed description of the services included in the Minimum Monthly Cost such as geographical limitations and time of day restrictions
• Details and rates for additional overage charges (additional minutes or data usage)
• Description of optional services and instructions for where to get further details on rates and restrictions
• A description of temporarily reduced or waived charges (promotional offers)
• Details, including costs of any one-time fees, such as hardware activation fees
• How any cancellation fees will be calculated
• If hardware was provided for free or at a reduced cost as part of the contract; details regarding its retail value and any associated subsidy provided by the wireless provider.

Today, most of this information is given to customers through advertising collateral and during the sales process when customers are signing cell phone contracts. The new cell phone contract laws require this information to be part of a customer’s contract.

Do the new cell phone contract laws apply to existing customers?

The new cell phone contract laws apply to new cell phone contracts signed on or after September 15, 2012 and to any existing contracts that are renewed or extended on or after September 15, 2012. Existing customers that signed contracts prior to September 15, 2012 are subject to the existing terms and conditions of their cell phone contract.

How will Termination Fees/Early Buyout fees be calculated under the new cell phone contract laws?

The termination fee for customers ending their contracts early will vary depending on the type of hardware selected. If a customer was given a phone for free or at a reduced rate when signing a fixed term contract, the termination fee will be based on the difference between the retail value of the hardware and the price the customer paid for it, prorated over the contract term length. That amount is equal to the formula S – (S x E ÷ T), where

• S = the difference between the retail value of the hardware and what the customer paid for it, known as the hardware subsidy
• E = the number of months that they have elapsed since the contract started
• T = the number of months of the entire contract term

For example: $590 retail priced phone where customer pays $50 based on a 2-year contract.  If a customer cancelled after 16 months, they would pay $180, calculated as follows:

($590 – $50) – [($590 – $50) x 16 ÷ 24].

Do the new cell phone contract laws apply to business customers?

No, the new cell phone contract laws do not apply to business contracts – they only apply to contracts for personal, family or household purposes. However, MTS business customers will receive the benefit of the changes associated with the presentation of the contract and the revised termination fee calculation.

Do the new cell phone contract laws apply to prepaid cellular service?

No, the new cell phone contract laws do not apply to contracts for prepaid cellular service.

What impact do the new cell phone contract laws have on cellular hardware?

The new cell phone contract laws mandate that service providers inform customers whether cellular phones are locked or unlocked and new or refurbished. All other aspects related to the actual cellular hardware remain unchanged (such as accessories, warranty, and hardware replacement).

What’s changing with respect to advertising with the new cell phone contract rules?

Advertising of prices associated with cell phone services must now include any mandatory additional fees like Wireless Network Charge, System Access Fees and E911 charges. Any promotional discounts must also be clearly explained.

After the new cell phone contract laws come into effect, what changes can MTS make to a customer’s price for cellular service while under contract?

For customers signing a contract after September 15, the new laws state that the price for all of a customer’s base services are locked-in for the duration of their contract and cannot be changed by the service provider (this is what will be called the “Minimum Monthly Cost” on a customer’s contract).

What is the Minimum Monthly Cost?

The Minimum Monthly Cost will be a new item within the MTS Wireless Service Agreement. The Minimum Monthly Cost is essentially the sum of the rate plan for base services that a customer selects and any mandatory monthly fees like Wireless Network Charge or System Access Fee & E911 charges. Details of what services are included within the Minimum Monthly Cost must also be included in the wireless contract. The Minimum Monthly Cost will not include any optional features.