Terrible extortion $290 to end contact 2 weeks early

Forums › 2degrees (including Slingshot, Orcon, Flip, Stuff Fibre, MyRepublic, 2talk and Vocus) › Terrible extortion $290 to end contact 2 weeks early

MikeB4

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#201334 14-Aug-2016 18:15

My wife has two weeks to run on her contract which she pays $130 per month, she was told by the Lower Hutt outlet that she will have to pay $290.00 to close the contract TWO weeks early. That is disgraceful, charging more than twice the monthly amount for two weeks. That is extortion.

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Biddle Corp

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#1611490 14-Aug-2016 18:37

Why do you think she should be exempt from an ETC? I'm sure the ETC price was made very clear in the contract.

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Zeon

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#1611491 14-Aug-2016 18:38

Why not just leave the connection active but not used for the 2 weeks? If its to port a number can you just port the contract to some random prepay number for the 2 weeks?

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dejadeadnz

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#1611509 14-Aug-2016 19:01

sbiddle:

Why do you think she should be exempt from an ETC? I'm sure the ETC price was made very clear in the contract.

This answer is totally wrong in law. Parties to a contract are free to agree to amounts for early termination that genuinely reflect lost opportunity/profits (i.e. liquidated damages) -- what no party is free to impose on another as a matter of civil law is a sanction for terminating a contract early, i.e. a penalty. What MikeB4 described on the face of it is a quintessential penalty and, therefore, unenforceable in law. It is also very likely an unfair contract term under s 26A of the Fair Trading Act if the contract was entered into and/or renewed or varied after 17 March 2015.

Sideface

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#1611511 14-Aug-2016 19:03

MikeB4: <snip> That is extortion.

No, it's not.

It is completely legal.

Just follow the advice given above.

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dejadeadnz

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#1611513 14-Aug-2016 19:07

Commerce Commission's Guidelines on Unfair Contract Terms

Note page 18, 20 - 23 on penalties. Frankly, 2 Degrees has some serious explaining to do. Quite disgraceful. And, no, Sideface -- as a lawyer who actually works on FTA compliance, whilst this particular issue hasn't been tested in court (yet), I quite strongly take the view that a $290 termination fee for ending a contract 2 weeks early is an unenforceable penalty. And regardless of what the law says, as a risk/compliance guy I consider any company that tries to enforce this to be nothing short of a disgrace,

It might not be extortion in law but it sure is pretty disgraceful.

MikeB4

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#1611518 14-Aug-2016 19:20

She wants to do it now as she will be in China so wanted to arrange it early. Even though the final month payment has not invoiced yet she asked if she paid the August payment now and close would there still be a penalty. They advised that the Penalty would still be charged even though there is no financial loss.
We asked if we paid the month now and in two weeks went in to close would there be any more due, she was advised no there wouldn't. I may have used the term extortion wrong but the 2D stance is disgraceful and illogical.

The chances of winning customers back is very much influenced by how the seperation was handled. The 2D attitude guarantees she will never return to 2D.

tdgeek

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#1611519 14-Aug-2016 19:23

You might want to contact them and quote Deja's Fair Trading Act and ComCom details. They may take heed of that, or decide to "make this problem go away"

MikeB4

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#1611520 14-Aug-2016 19:25

Thank you very much Dejadeadnz, your advice is very much appreciated and will be passed onto my wife.

dejadeadnz

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#1611596 14-Aug-2016 21:40

MikeB4: Thank you very much Dejadeadnz, your advice is very much appreciated and will be passed onto my wife.

Here's what I would do (some of the steps are pretty conventional; others are a bit more confrontation than what some people are comfortable with):

1. If your wife wishes to terminate for her reasons, do it and tell 2Degrees so.

2. Make clear to them that you will under no circumstances pay the unenforceable contract break fee and that you consider that fee to be in dispute. Make clear to them that this is a disputed "debt" and they are not to pass it on to a debt collector.

3. Advise them in writing (your average genius at the call centre will not understand a word of what I am about to describe) that you consider the fee to be an unenforceable penalty at common law, i.e. that it exceeds what can be regarded as a genuine pre-estimate of the damage likely to be caused to 2Degrees by any breach of a contract. Further advise them that as per the High Court of Australia's decision in Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205, it is now settled law in Australia (and likely highly persuasive in NZ courts) that the doctrine on penalties apply to situations where the parties have agreed to a pre-set amount for any stipulated event, e.g. early user-initiated termination

4. Ask for your complaint to be directed to their legal counsel or General Counsel (head of legal). If your wife's contract was entered into after 17 March 2015 and/or varied or renewed after that date, reference s 26A of the FTA as well. Put "Without prejudice save as to costs" at the top of your letter and/or e-mail.

5. Also reference the fact that reasonable people would agree that compensation by the user for loss of a bargain/expected profits for early termination is reasonable but to demand the amount as 2degrees did in her circumstances effectively is a form of enforced betterment in favour of 2degrees (to put it more colloquially, contract law does not exist for people to hold others over a barrel). Demand a response within two weeks and advise them that if they insist on getting their termination fee, you'll see them at the Disputes Tribunal and that the correspondence will be shown to the Tribunal referee.

6. [The steps from 6 onwards are entirely optional but I would do them]. Post on their facebook, link to the Commerce Commission guidelines on unfair contract terms, and shame them.

7. Tell everyone you know who cares about the rule of law to not use 2degrees. I know I certainly will.

Unless 2Degrees is startlingly dumb, it will back off. I have no time for corporates who mis-treat customers like that. And I work for a substantial corporate. Also, it's quite alarming how frequently I see people reflexively agree with the corporates in these and similar circumstances. I don't disagree with 2Degrees here because it's a corporate -- it's because they are morally (at a minimum) and legally (almost certainly) in the wrong. For all their hoopla about being for the oppressed consumer, their legal/risks people aren't doing their jobs IMO.

CYaBro

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#1611605 14-Aug-2016 21:53

Have you actually spoken to 2D call centre, rather than taking the word of an employee in one of the stores?

Opinions are my own and not the views of my employer.

dejadeadnz

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#1611609 14-Aug-2016 22:09

dejadeadnz:

3. Advise them in writing (your average genius at the call centre will not understand a word of what I am about to describe) that you consider the fee to be an unenforceable penalty at common law, i.e. that it exceeds what can be regarded as a genuine pre-estimate of the damage likely to be caused to 2Degrees by any breach of a contract. Further advise them that as per the High Court of Australia's decision in Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205, it is now settled law in Australia (and likely highly persuasive in NZ courts) that the doctrine on penalties apply to situations where the parties have agreed to a pre-set amount for any stipulated event, e.g. early user-initiated termination

For those in similar circumstances and/or just want to arm themselves with all the facts, the UK Supreme Court (highest court of their land) in a case called Cavendish Square Holding BV v Makdessi developed a set of tests more lenient towards the likes of 2Degrees. Cavendish essentially says that a clause demanding a fixed sum of money on the happening of an event is not an unenforceable penalty IF it is designed to protect the legitimate interests of the innocent party and that the sum demanded is not disproportionate to that interest. A copy of the decision is here. But 2Degrees still fails under this more favourable test. A pro rata contracted price (i.e. not pure profit) for that period was $65. They wanted $290.

The New Zealand High Court has recently approved Andrews (the Australian case I described in my previous post) but it might not be the last word on our law as the parties in that case contractually agreed to be bound under Australia law, hence Andrews must by extension be binding.

mattwnz

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#1611657 15-Aug-2016 01:19

CYaBro:

Have you actually spoken to 2D call centre, rather than taking the word of an employee in one of the stores?

A call centre front line person probably wouldn't be much better, as they will just be following a flowchart. They should ask to escalate it to a manager and agree on a reasonable fee.

surfisup1000

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#1611682 15-Aug-2016 08:40

MikeB4: My wife has two weeks to run on her contract which she pays $130 per month, she was told by the Lower Hutt outlet that she will have to pay $290.00 to close the contract TWO weeks early. That is disgraceful, charging more than twice the monthly amount for two weeks. That is extortion.

I got caught in this by telecom -- had to pay a huge termination fee a week outside the contract. Can't recall exact amount but i think it was around $150. There was some reason i couldn't wait , something to do with a newly released iphone.

In two minds on this one -- you sign a contract , the correct approach is to meet your obligations on your side. Regardless of whether you are dealing with a corporation or a friend or neighbour.

But $290? Two weeks early? Seems they should be a bit nicer.

This has been going on for many years, interesting the commerce commission has not looked into it before. Especially since most of the large telcos/ISP's appear to do this.

MikeB4

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#1611689 15-Aug-2016 08:55

The reasons she is changing are....

1. She travels to China, Singapore, Australia and other at least 6 times per year and 2D is hopeless for that.

2. She travels extensively in NZ and the 2D coverage is in her words total cr@p.

3. Their current plans do not meet what her requirements are.

She is travelling extensively over the next three -four weeks and wanted to sort it before she left.

dejadeadnz

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#1611704 15-Aug-2016 09:33

MikeB4:
The reasons she is changing are....

1. She travels to China, Singapore, Australia and other at least 6 times per year and 2D is hopeless for that.

2. She travels extensively in NZ and the 2D coverage is in her words total cr@p.

3. Their current plans do not meet what her requirements are.

She is travelling extensively over the next three -four weeks and wanted to sort it before she left.

Whatever reasons she has for changing doesn't change the fact that the current fees being demanded by 2degrees is not commercially realistic and almost certainly unenforceable. And frankly it saddens me to see how so people are continuing to "+1" sbiddle's statement.

Let us know how you get on. Given that your wife will need/want roaming, it is certainly all the more understandable that she wants to get on with changing providers.

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