How to get out of a Phone Contract
Excited about the release of a new iPhone but stuck in a plan? Here are some things to consider to get that new phone.
With most Australian service providers offering only twenty-four month plans for mobiles, and manufacturers releasing phones every year, consumers are locked into phone plans, and are left waiting for their contracts to finish before they can get their hands on new technology.
Importantly, the terms commonly referred to as a Critical Information Summary (CIS), that most people agree to when entering a contract with a provider, are just that, a ‘summary’. Often you will have to go to the customer terms and conditions website to find the full set of terms you are agreeing to.
How to get out of a Phone Contract
If you are looking to get your hands on the latest release iPhones but are still locked into a contract with your provider, consider these points before paying exit charges.
Terminating Early in a Contract
Firstly, it should be noted that some carriers offer a ‘satisfaction guarantee’ or ‘cooling off period’. Essentially, these terms may allow a customer to cancel a contract early based on the quality of the network or because there is a cooling off period within the contract. Usually, such a cooling off period extends for less than a month.
Such a cooling off period will usually depend on the terms a customer agrees to, however, by law, there is an automatic cooling off period depending on how the contract was sold. Under Australian Consumer Law if a salesperson approaches you by doing door-to-door sales or via telemarketing, you are entitled to a 10 business day cooling off period where you may cancel your contract.
Usually, these grounds are extremely difficult to argue. Depending on the circumstances you may have grounds to cancel your service contract if you are experiencing bad reception. Primarily, if you are early in your contract it is important to determine if any cooling off periods apply. If you are outside of a cooling off period, it is beneficial to discuss the issue with your service provider, especially if you are in a black spot area.
If your service provider does not remedy the issue, you may have grounds to go to the Telecommunications Industry Ombudsman to file a complaint about the service. It should be noted though, some providers will make you agree to your level of reception before you sign the contract, thus making it difficult to argue these grounds.
New Phone Each Year
Many providers now are providing the option of a discounted upgrade depending on the amount of time a customer has spent in a contract. Almost always, this will apply halfway through a contracted period and will allow a customer to upgrade to a new plan with a new phone, in return for a fixed payment and the return of the original device in good condition. This payment is usually between $50 and $200 and will allow customers to forgo any exit charges they would usually incur by cancelling.
If nothing else, you will normally have the option of upgrading to a new phone by paying any early termination charges (ETCs). This is usually the most expensive option, but what should be noted is that many carriers will provide a discount so long as you upgrade with the same provider. Normally, a contract is split into a Device Repayment and a Service Repayment. Service providers have the option of discounting the service repayment cost which is approximately half of the total ETC. Importantly, this is provided at the discretion of a provider as per the terms of the agreement.
Providers have tight control over how consumers can cancel an existing subscription. Whilst this is the case, there are still options for getting out of a contract at a discounted rate allowing you to get you hands on a new phone!
Let us know your thoughts on terminating phone contracts by tagging us #lawpath or @lawpath
Adam is a Consultant at Lawpath working with the Marketplace Team. With an interest in consumer and commercial law, he is currently completing a Bachelor of Commerce and Bachelor of Laws at Macquarie University.