• by Aaron Baar , January 29, 2009

As family budgets tighten and the recession deepens, watchdog group Consumer Action is encouraging consumers to watch out for hidden fees and penalties when it comes to cell phone contracts.

"As more and more Americans shift their phone use to cell phones, the costs and pitfalls associated with contract-based cell phones become clearer and clearer," said Consumer Action executive director Ken McEldowney in a teleconference call with reporters. "In this new year, consumers worried about recession-driven pressure on their jobs and pocketbooks need to be more careful than ever about avoiding paying more than is necessary for cell phone service."

According to the San Francisco-based group, consumers should watch out for five issues in particular over the course of 2009. At the top of the list are early termination fees that occur when someone tries to break a pre-determined contract. Although most cell phone companies have begun pro-rating their early termination fees, lessening the fees as the end of a contract nears, "many consumers will still face the full (or nearly full) ETF penalty--or be forced to stick with a carrier they can't afford to dump," Sol Carbonell, the group's associate, national priorities, said during the teleconference.

A second issue comes from mandatory contract extensions that come when one tries to replace a lost or broken phone, which can be an increasingly significant issue as teen and tween cell phone use continues to rise.

"Many consumers learn the hard way that there's a catch when you try to replace a lost or broken cell phone--your contract may start all over again from scratch on the phone--even if you've been paying faithfully each month for replacement insurance," Carbonell said. She suggested either putting younger consumers on prepaid plans or replacing SIM cards on a cheaper, unlocked phone.

The group also advised consumers to watch out for overage fees when exceeding monthly limits on contracts and texting fees associated with their cell phone accounts. And the group warned immigrants to pay close attention to the rules on international calling cards. Many of the fees are not disclosed or are only disclosed in very small print on the back of the card.

"Even though limited progress has been made on some contract-based cell phone billing and disclosure issues, there are still many problems that will continue to confuse and mislead consumers in 2009," Carbonell said. "Our goal here is to help shine a spotlight on some of the least understood problem areas."

Beyond the telephone conference and information on its Web site, the group has no major consumer outreach initiatives in regard to the cell phone market, due to budgetary constraints, McEldowney said.