Distance service contracts are contracts for cell phones, residential phones, internet, cable and satellite television, and security systems. There are two types of distance service contracts: fixed term contracts and indeterminate term contracts.
Frequently Asked Questions:
- What contracts does the new law apply to?
- When did the law come into effect?
- I signed a cell phone, residential phone, internet, television or security system contract before September 27th, 2012. Does the new law apply?
- What contract information must be disclosed to the consumer?
- Will I be charged for my services while my device is being repaired?
- When can I cancel my contract?
- Will I pay a fee if I cancel my contract?
- I just received my first bill and the total amount is more than the advertised price. Is this legal?
- Can the company change the terms of the contract?
- Can I change the terms of the contract?
- What happens when my contract expires?
- Do I have to provide a security deposit and when do I get the deposit back?
- What if I find an unauthorized charge on my bill?
- Who can I contact if I have any questions or concerns?
What contracts does the new law apply to?
The law applies to distance service contracts, which means contracts for cell phones, residential phones, internet, cable and satellite television, and security systems. There are two types of distance service contracts: fixed term contracts and indeterminate term contracts. The law applies to both fixed term and indeterminate term contracts. A fixed term contract has a specified term (i.e. 12, 24 or 36 months). An indeterminate contract does not have a specified term (i.e. month-to-month).
The new law does not apply to prepaid phone cards/pay-as-you-go services.
When did the law come into effect?
The law came into effect on September 27, 2012.
I signed a cell phone, residential phone, internet, television or security system contract before September 27, 2012. Does the new law apply?
No. The new law applies only to contracts entered into on or after September 27, 2012.
What contract information must be disclosed to the consumer?
Companies must disclose the following information, in writing, to a consumer who enters into a contract:
- A detailed and itemized description of each service to be provided, including the associated monthly rate for each service provided;
- The total amount the consumer must pay each month;
- Applicable restrictions on the use of the services (i.e. time constraints for “included” airtime) and local service coverage areas, long distance areas and roaming areas;
- That any rebated devices (ex. cell phone or wireless device, modem, receiver, security system etc.) are rebated and not free, and the total value of each rebate that will be used in calculating a cancellation fee;
- The term (ex. month-to-month, 12 months, 24 months, 36 months etc.) and expiry date of the contract;
- The circumstances under which a consumer or company can cancel or amend a contract;
- Information respecting applicable warranties;
- Rates for exceeding usage limits;
- Contact information for the supplier of the device and the supplier of the service;
- Customer service obligations of the supplier of the device and the supplier of the service;
- With respect to contracts for cell phones, notification that roaming charges may apply, the number of included airtime minutes and data usage, and per-use charges for incoming text messages, emails and subscription text messages where applicable;
- A statement whether the device is “locked”, which means that the device is subject to a technological or physical feature that restricts the use of that device to a particular service provider (ex. a device purchased for use on one company’s network that cannot be used on any other company’s network is a locked device);
- A description of any one-time costs charged for paper invoices and detailed account statements; and,
- Any restrictions respecting free or included services.
Will I be charged for my services while my product is being repaired?
Companies cannot charge consumers for services that were unavailable while a device is being repaired, if:
- the device is under warranty; and,
- the device is necessary for the use of the services purchased; and,
- the company did not provide a replacement device during the repair period or provided a replacement device that was not compatible with the purchased services. For example, if a consumer has a smartphone and pays a monthly fee for a data package and is provided with a replacement device that does not support data use, the company cannot charge for the data package during the period of time that the smartphone is being repaired.
As well, the company is prohibited from charging a fee for a replacement device when the device being repaired is under warranty.
When can I cancel my contract?
A consumer may cancel a contract, at any time for any reason, by providing written notice (ex. email, letter) to the company. The cancellation is effective on the date the notice is provided to the company, unless a later date is specified in the notice by the consumer. A cancellation fee may only be charged in accordance with section 35.9 or 35.10 of the Consumer Protection and Business Practices Act.
Will I pay a fee if I cancel my contract?
Fixed term contract
Where a consumer cancels a fixed term contract, the company may only charge a cancellation fee in accordance with the new law. The amount of the cancellation fee depends on whether the company offered a rebate on a device (i.e. cell phone or wireless device, modem, receiver, security system etc.) and the number of months remaining in the contract.
When a rebate is provided on the device:
In calculating the cancellation fee in this instance, the company must use the formula outlined in section 35.9 of the Consumer Protection and Business Practices Act, factoring in the rebate amount, remaining duration of the contract, and the full term of the contract.
ex. – A consumer enters a 36 month fixed term contract. The company provided the consumer with a rebated device that has a retail value of $500. The consumer cancels the contract during the 22nd month and there are 14 months remaining in the contract. The maximum cancellation fee is $194.44 (500 x 14/36=$194.44).
When a rebate is not provided on the device:
If the company had not provided a rebate on the price of the device, the maximum cancellation fee that the company may charge is the lesser of:
- $50; or
- An amount not more than 10% of the remaining cost of the contract.
ex. – A consumer enters into a 36 month fixed term contract at a monthly cost of $30. The company did not provide a rebate on the price of the device necessary for the use of the service. During the 22nd month of the contract, the consumer cancels the contract. The maximum fee that the company may charge the consumer is the lesser of:
- $50 or;
- An amount not more than 10% of 420 (14 months remaining x $30 monthly rate of the contract) = $42.
In this example, the company may not charge the consumer a cancellation fee exceeding $42 since this amount is less than $50.
Indeterminate term contract
Companies are prohibited from charging any cancellation fees when a consumer cancels an indeterminate term contract, unless there is an unpaid balance on the sale price of the device(s) and the balance is progressively reduced each month. In such a case, companies may only charge a cancellation fee in accordance with section 35.10 of the Consumer Protection and Business Practices Act which states that the cancellation fee shall not exceed the unpaid balance of the sale price of the goods at the time the contract was entered into less the amount obtained by multiplying 1/48 of that balance by the number of months of the contract that have elapsed.
A consumer enters into an indeterminate term contract and a company provides the consumer with a device (ex. cell phone) that has an unpaid balance of $120 at the time the contract was entered into. Each month, the company reduces the $120 balance by a certain amount. The consumer cancels the contract during the 22nd month of the contract.
To calculate the maximum cancellation fee that can be charged to the consumer, the company must apply the formula set out in section 35.10 of the Consumer Protection and Business Practices Act, which in this example would be $120 – [1/48 x $120 x 22] i.e. $120 – $55= $65. In this example, the maximum cancellation fee that the supplier can charge to the consumer is $65.
I just received my first bill and the total amount is more than the advertised price. Is this legal?
No, advertisements must state the total monthly cost (excluding tax).
Can the company change the terms of the contract?
Companies are prohibited from changing the price, term, or nature of the devices or services of a contract. If a company intends to amend the contract they must notify the consumer at least 30 days in advance. If the amendment would increase the consumer’s obligations or reduces the company’s obligations, the consumer may cancel the contract, without any penalty or fees, by providing written notice to the company within 30 days of the effective date of the amendment.
Can I change the terms of the contract?
Consumers may amend a contract to cancel optional services or add optional services at any time without incurring a penalty or fee, aside from the fee for the added optional service (ex. adding an optional text messaging package that has an associated monthly fee of $5 would increase the consumer’s contract amount by $5 monthly). If permitted by the company, consumers may also amend a contract in respect of services other than optional services.
What happens when my contract expires?
Companies are prohibited from including a contract clause that automatically renews the contract upon expiry, unless the renewal is for an indeterminate period of time (ex. month-to-month). Companies must give consumers written notice of the expiry date of the contract 60-90 days in advance of the contracts’ expiry. Where applicable, such notice must also include the company’s intent to renew the contract for an indeterminate period of time.
Do I have to provide a security deposit and when will I get the deposit back?
The company may require you to provide a security deposit. If the company requires a security deposit, they must return security deposits, plus interest and less any amounts due under the contract, within 30 days of contract expiry or cancellation.
Companies are prohibited from cancelling a contract for failure to pay amounts owing under the contract when the unpaid balance does not exceed the amount of the security deposit.
What if I find an unauthorized charge on my bill?
If a customer feels there is an unauthorized or incorrect charge on his or her bill, the company should be notified right away. If the company determines that the charge is unauthorized or incorrect, they must reverse the charge within 30 days of notification by the consumer. If a consumer has set up authorized pre-payment through a bank account or credit card and an unauthorized or incorrect charge has already been paid through the pre-payment authorization, the company must refund the charge directly to the consumer’s bank account or credit card. The company may not simply apply a credit against future bills in this instance.
Who can I contact if I have any questions or concerns?
Consumer Affairs Division, Service NL