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FCC to hold hearing on early termination fees

The federal agency will address consumer complaints of early termination fees on cell phone contracts in a June 12 hearing.

The Federal Communications Commission has scheduled a June 12 hearing to debate whether the agency should regulate early termination fees (ETFs) on cell phone contracts. According to The Washington Post, FCC Chairman Kevin Martin hopes to address growing consumer complaints over ETFs, which have become the subject of class action lawsuits in several states.

The FCC already is negotiating with several carriers on how it would assume federal oversight over EFTs, which currently are subject to state laws. The proposals include capping the fees at an undisclosed amount, requiring carriers to prorate ETFs, and prohibiting the providers from charging an ETF in the first 30 days of a customer's contract.

Though many carriers prorate their ETFs already, they are not required to do so. If the FCC assumes ownership of the fees, such policies would become compulsory for carriers. But in exchange, the new federal oversight would preempt the class action lawsuits.

Though Sen. Amy Klobuchar (D-Minn.) has proposed similar rules in her Cell Phone Consumer Empowerment Act, the Post reported that she is against FCC oversight, saying the states are the "best watchdogs" for the industry.

Carriers have long held that ETFs are a way for them to recoup costs for offering free or heavily discounted new phones to customers. The Cellular Telecommunications Industry Association, which represents carriers in Washington, supports ETFs for the same reason.