Telus considering challenge of court ruling on cancellation fees

Telus Corp. is contemplating asking the Supreme Court of Canada to review a June decision by Quebec’s highest court that ordered the telecom to pay back customers who years ago forked over what the court called excessive early cancellation fees. Between at least January 2008 and June 2010, Telus’ wireless division charged Quebec customers 49 per cent more than the company lost in early termination fees, while its home phone (wireline) business brought in a surplus of 38 per cent over the amount it lost, Quebec's Court of Appeals found in a June 25 French-language decision. The court found the surpluses “clearly abusive” under the province’s consumer protection laws and disadvantaged customers in an “excessive and unreasonable way.” The relevant consumer protection laws were amended after June 2010 to severely limit penalties on contract cancellations. In late 2010, Telus announced it would eliminate contract termination fees and instead charge customers the remaining cost of the company’s subsidy of the wireless device. To cancel a Telus contract today, customers must pay off the rest of their device plus a $50 early cancellation fee. Before that, Telus’ terms for wireless service cancellation stipulated that the fee is the greater of two amounts: either $20 multiplied by the number of months remaining on the contract term, or $100. The policy notes that the fees are “required as liquidated damages and not penalty.” For wireline, it is the greater of $10 per month multiplied by the number of months remaining on the contract or the value of the monthly payment times the number of months left. Court evidence shows that during the period in question, 75.7 per cent of customers were on three-year contracts and nearly nine per cent cancelled their contracts before the end of the term. The court found that for various reasons, not all customers paid the cancellation fees -- some, even less than $100. Telus mobile billed roughly 152,837 customers a total of $52 million in termination fees, but only recouped $11 million of that from 57,377 customers. Its wireline division billed about $7 million in cancellation fees to 25,258 customers, but only received about $2 million from 14,311 customers. Judges France Thibault, Jocelyn Rancourt and Claudine Roy established two separate damage costs to Telus from early termination for its wireless and wireline businesses. For the former, they established that Telus lost the average cost of the device plus a $15 unlocking charge for a total average loss per member of $226.71. For the latter, the loss included discounts on the monthly rate, promotional gifts and additional benefits for a total average of $201.38. The judges then divided the termination fees Telus billed by the number of customers who cancelled to come up with the difference between damage suffered and fees recuperated. For wireless, Telus was imposing an average termination fee of $338.41 ($52 million divided by 152,837) versus a loss per member of $226.71, while charging an average of $278.24 ($7 million divided by 25,258) for wireline cancellations. The person representing the class of customers, Claude Gauthier, was seeking compensation paid $559.87 to cancel his wireline contract. He sought to have all cancellation fees waived plus punitive damages because he said he wasn’t told about the cancellation fees in a phone conversation he had with a Telus employee before signing a contract. The judges noted that Telus made clear to its employees to discuss cancellation fees. But the court found that Gauthier’s case couldn’t be granted because he was a long-time customer, whose last five contracts with the company all included the cancelation policy. The court also found there wasn’t enough evidence to show that others in the prospective class were ill-informed. The court, then, established that only termination fees in excess of what Telus suffered can be recovered. The consumer protection laws allow consumers to claim a reduction in those obligations “where the disproportion between the respective performance of the parties is so great as to amount to exploitation,” the judges wrote. As such, on the basis that the extra termination fees were unreasonable, the appeal court ruled that it would partially allow the class action, order recovery claims, and asked the lower court to set the terms and conditions for reimbursement for those who paid in excess of what Telus suffered. The judges recommended that a class be formed of those who actually paid early termination fees to Telus and the Superior Court -- which was overruled in its January 2017 decision that didn’t find such excesses -- establish the terms of reimbursement. The appeal court also found the lower court erred when it said it didn’t have jurisdiction over the CRTC-regulated entities. Telus spokeswoman Jacinthe Beaulieu said in an emailed statement that the company has “always been transparent about termination fees and how they are calculated. “We are reviewing the decision and considering whether to seek leave to appeal to the Supreme Court of Canada.” Appeals to the Supreme Court must be filed within 60 days of the decision, according to the Supreme Court Act. In 2014, both Rogers Communications Inc. and BCE Inc. were forced to repay $15 million and $1 million, respectively, plus additional monetary compensation due to excess fees charged on early contract terminations. The Supreme Court of Canada, notably for Telus’ case, denied both the companies’ appeal requests in July 2017. Quebec’s amended code in 2010 stipulates that fees cannot exceed the discount on a purchased phone or, when a phone is purchased with no subsidy, no more than $50 or 10 per cent of the value of unpaid services. The case’s history precedes events that have vastly changed the telecom landscape. The CRTC has since adopted the Wireless Code in 2013, which effectively terminated three-year contracts that had made up a large portion of Telus’ base by outlawing cancellation fees after two years. That same year, Ontario passed its consumer protection bill that capped cancellation fees at no more than $50. Meanwhile, Manitoba modeled its consumer protection law for wireless contracts on Quebec’s. But the regulator must still face yet another emerging change in the industry: the introduction of device financing plans -- which came alongside ‘unlimited’ data plans -- that have caused a stir since Rogers introduced a 36-month financing option that was followed by Telus and pledged by Bell before the CRTC launched an investigation into it. Critics say the longer-term option would roll the industry back to a time when customers were locked-in to their existing service providers for three years -- unless they pay hefty amounts to switch. — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Telus considering challenge of court ruling on cancellation fees

News | August 23, 2019

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Telus considering challenge of court ruling on cancellation fees

News | August 23, 2019

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