AT&T to begin prorating early termination fees for new contracts

AT&T Wireless announced Thursday it will prorate early termination fees (ETFs), giving consumers "greater flexibility" to opt out of their contracts without paying the full $175 penalty.

Beginning May 25, customers who are under a one- or two-year phone contract will have $5 taken off the termination fee per month for the length of the contract. AT&T customers who agree to a one- or two-year service agreement before May 25, however, will still have to pay the entire $175 fee.

The move was expected, as AT&T announced the plan last October. However, it was scheduled to be introduced earlier in the year.

Customers who do not want to enter contracts or possibly suffer an early termination fee if they leave AT&T have several options, including buying a phone for full price and selecting a month-to-month contract, using a compatible GSM handset and purchase a SIM with a month-to-month plan, or purchasing an AT&T GoPhone.

Verizon Wireless started prorating termination fees in late 2006, with T-Mobile and Sprint Nextel expected to announce their own prorated early termination fees sometime in 2008.

ETFs have long been a thorn in the sides of consumers, with lots of fine print and hidden fees around every corner.

To help consumers, Senator Amy Klobuchar and Senator Jay Rockefeller introduced a bill in late 2007, the Cell Phone Consumer Empowerment Act of 2007, which would have forced mobile service providers to offer "simple, clear information on their services and charges" before customers entered a long-term contract.

Furthermore, subscribers would have been given a 30-day grace period to exit a mobile contract without having to pay a fee - and all ETFs would be prorated to benefit the consumer. But since its introduction last year, the bill has yet to leave committee and may never actually receive a vote now that carriers are proactively moving to prorate ETFs.