T-Mobile no contract plans said to be misleading, must offer refunds

T-Mobile declared that it has canceled its membership in the carrier club by doing away with contracts, but at least one state attorney general is calling the Un-carrier's bluff.

"My office identified that T-Mobile was failing to adequately disclose a critical component of their new plan to consumers," said Washington State Attorney General Bob Ferguson on his website.

"We acted quickly to stop this practice and protect consumers across the country from harm."

T-Mobile has been advertising "no restrictions," "no annual contract" and no requirement that the consumer "serve a two-year sentence."

In reality, the attorney general found it didn't adequately disclose that customers who bought a phone using the 24-month payment plan must carry a service agreement or pay the full balance.

Higher than early termination fees

One of the benefits implied by the T-Mobile no-contract changeover is that customers would be able to avoid those much-maligned early termination fees.

However, the AG looked at the fine print and saw that this is not always the case.

"Consumers who cancel their wireless service face an unanticipated balloon payment for the phone equipment," discovered Ferguson's office.

"In some cases higher than termination fees for other wireless carriers depending on how early they cancel."

He surmised that "instead of a 'two-year sentence,' for wireless service, consumers face a different two-year 'sentence' to avoid a lump-sum balloon payment for the phone."

Right to a refund

Following its investigation, Ferguson's office said it had T-Mobile sign a court order that ensures the carrier clearly communicates the limitations of its new "no contract" service plans.

Effective nationwide, this order also requires the fourth-place carrier to allow "duped" customers to exit their contracts without penalty, including those who just bought the T-Mobile iPhone 5 and HTC One.

"Consumers who purchased T-Mobile service and equipment between March 26 and April 25, 2013 can obtain a full refund for their telephone equipment and cancel their service plans," Ferguson's website read.

"[They are not] required to pay the remaining balance owed on their devices, as long as the customer cancels his or her service per the terms of the agreement, including returning the equipment to T-Mobile."

Advertising of the too-good-to-be-true plans should be clearer from here on out for T-Mobile's existing 33.4 million customers as well as the incoming 8.9 million subscribers from the MetroPCS merger.