Federal Courts decline to block suit that alleges "break fees" are illegal under Iowa law.
DES MOINES. Attorney General Tom Miller said Friday that a state consumer protection lawsuit against U.S. Cellular has been freed to proceed in the Iowa courts.
"US Cellular tried to get the Federal Courts to stop our Iowa suit challenging their cancellation fees," Miller said. "Now two federal courts have turned them back and the case will go back to where it should be, in the Iowa courts."
Miller filed suit in Polk County District Court on April 11, 2000, alleging that US Cellular is violating state consumer fraud and consumer credit laws in its advertising and sales of cellular phone service in Iowa. The suit alleges that the company has used deceptive and illegal advertising practices, and then imposed illegal "break fees" up to $300 if consumers tried to cancel the contract. On the same day, April 11, 2000, companies controlled by US Cellular filed suit in federal court asking the court to block the Attorney General's action in the Iowa courts.
On Thursday, February 14, the Eighth Circuit US Court of Appeals denied US Cellular's attempt to bar the Attorney General's Office from enforcing state consumer protection laws in Iowa courts in the matter.
Miller said: "Our suit that now can proceed in state court alleges that the company has enticed consumers to sign long-term contracts, sometimes with misleading advertisements about pricing or coverage, and then effectively prevented customers from cancelling the contracts by illegally imposing the hefty break fees."
The State alleges that the "break fees" are illegal under Iowa law. Iowa consumer credit law gives Iowa consumers a right to cancel "executory contracts" - contracts that are payable in more than four installments, that provide for service in four or more installments, and that defer debt. Consumers cannot be held liable for charges they have not yet incurred as of the date of cancellation, the State argues, regardless of contracts that might say otherwise. The suit also alleges that US Cellular imposed other illegal charges on consumers, such as debt collection fees and attorney fees.
The suit also alleges that the company has used misleading advertisements. For example, the suit alleges the company offered "free, unlimited weekend calls," but changed its definition of "weekend" to eliminate free calls on Fridays. The suit also alleged that US Cellular advertised free offers such as free statewide calls, free telephones and free minutes, but sometimes failed to honor the offers.
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