'Buyer's remorse' clause for wireless customers proposed
Consumers want shorter cellphone contracts, CRTC hears
Posted: Feb 11, 2013 8:36 AM ET
Last Updated: Feb 11, 2013 4:22 PM ET
Wireless customers who sign a new multi-year contract with their provider should have 15 days to change their minds before being totally locked in, consumer advocates told a public hearing on proposed rules for wireless contracts and fees.
That would give them time to find out if they actually get a decent wireless signal in their local area, representatives of the Public Interest Advocacy Centre, Consumers' Association of Canada and the Council of Senior Citizens' Organizations told Canada's telecommunications regulator Monday.
"It is an important right that a customer must have to to assess whether service is actually something they're comfortable with, because we're talking about a very long contract," said Janet Lo, a lawyer for PIAC. Wireless contracts in Canada are typically three years.
Lo was speaking at the first day of Canadian Radio-television and Telecommunications Commission hearings on the proposed code that would specify rules for contract provisions such as cancellation fees, phone unlocking and contract changes.
The draft code proposes that every customer be given a personalized summary of their wireless contract. The summary would include important information such as the minimum monthly cost for their service and the total discount or subsidy they got on their new wireless device in return for signing a contract.
The sample contract in the document includes a proposed 15-day "cooling off period" in which any customer unsatisfied with the contract may cancel it without penalty if they have used less than a certain number of minutes.
Lo noted that many provinces have similar provisions protecting consumers in situations "that they understand to be pressure sales" and she suggested wireless contracts "would fall into one of those."
Her colleague John Lawford added that there are often local "blank spots" where wireless coverage is bad, but typically the agent in a store selling wireless service wouldn't know about them.
"We're saying in early days, when the company is quite genuine about supposedly satisfying the customer … they should bear that risk for that short period of time."
CRTC chair Jean-Pierre Blais suggested that a "buyer's remorse" clause isn't really necessary, given that once the draft code is implemented, customers will likely be able to compare contract summaries from different carriers before they sign.
"There's a paternalism that worries me here," he said, adding that the clause might be used not just when there are technical issues, but also when a consumer simply changes his or her mind.
Lawford agreed that was possible, but suggested it would be too complicated for the cooling off period to cover some reasons for cancelling and not others.
Overall, Lawford, Lo and their colleagues were enthusiastic about the draft code, saying there is "real hope" that it can change the wireless market to the benefit of consumers and that they feel the "spirit of cooperation" from the wireless carriers.
Nevertheless, his group proposed a number of changes and additions to the draft code, such as that:
- When customers dispute charges such as charges for premium text messages, that the onus be on the carrier to prove that the customer consented to those charges, since they have better access to the evidence.
- Customers be allowed to unlock their phones immediately, and that the unlocking fee be limited to the amount it costs the carrier to unlock the phone. The draft code does not specify an unlocking fee and proposes that subsidized devices can remain locked for up to 30 days.
- The code apply to customers of prepaid wireless services, not just post-paid customers; and to customers of existing contracts , not just those who sign contracts after the code is implemented. The consumer advocates were particularly concerned that prepaid cards don't specify the price per minute that the customer will be charged. They also proposed a ban on the expiration of minutes a certain time after the card is activated.
- Carriers be banned from making unilateral changes to customer contracts. The draft code currently proposes allowing carriers to make changes to a customer's contract. However, under the draft code, customers would either be allowed to cancel the contract without penalty or refuse the changes if they would increase the cost or decrease the amount of service he or she received.
- The Commissioner for Complaints for Telecommunications Services get more powers to enforce the code, such as the ability to hear complaints filed on behalf of a group of customers rather than just individual consumers.
Shorter contracts demanded
The consumer advocates also used the hearing to argue that consumers should have access to reasonable one- or two-year wireless service contracts, particularly since their devices often last no more than two years.
Compared to what's available in other countries, the three-year contracts that are the norm in Canada are "somewhat unusual," and are stifling competition, since consumers can't really switch carriers while they are locked into their contracts, they said.
However, Lawford added, shorter contracts are unlikely to appear on the marketplace "without a little push," such as requiring carriers who offer three-year contracts to also offer shorter ones with somewhat proportionate subsidies on devices such as iPhones.
Blais acknowledged that large numbers of wireless customers posting comments on the CRTC's online discussion about the draft code have been asking two-year contracts and many have complained that their devices only last about two years. The commission also acknowledged that contracts longer than two years are banned in jurisdictions such as the U.S. and Europe.
However, Blais questioned whether the current three-year contracts were, in fact, affecting competition, noting that Canadian wireless carriers spend huge amounts of money on advertising to attract and maintain customers.
"Well, that gets you in the store," responded Lawford. "But then when you get in the store … you have the phone $0, three-year contract. You ask for two years, forget it."
Or, the two-year contract will require the customer to buy the phone at almost the full price, he said.
Lawford and his colleagues stopped short of asking for a ban on three-year contracts, however. He noted that if parts of the draft code limiting termination fees and requiring carriers to unlock customers' phones are implemented, that will make it much easier for customers to walk away from their three-year contracts before the contract is up.
Those who don't complain
Regarding the proposal that the CCTS should have the flexibility to deal with groups and not just individual, Blais questioned why that should be.
Jean-Francois Léger, another lawyer representing the consumer advocates, said that in the past, telecommunications companies have resolved the complaints of individuals who complained to the CCTS, about certain practices, but continued those practices with their other customers.
"We have to think that the benefit to the carrier of not changing the practice outweighs any cost resulting from the complaints," he said.
Blais suggested that giving the CCTS the power to deal with group complaints meant that in practice, people who didn't complain would start having rights.
"That seems a bit odd, don't you think?" he asked.
"I think that if they have the same issue, it's not odd at all," Lawford responded. He gave the example of someone who was overbilled $9.95 who got the money back after complaining. Even if the other 100,000 customers who were overbilled didn't complain, he said, "it seems they all deserve $9.95."
The hearings will continue until Feb. 15 and the public can contribute to the online discussion until 5 p.m. ET that day. In addition, the CRTC announced Monday that it will accept written comments until March 1 and responses to the comments until March 15.
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