GTA was fined $500,000 by the Justice Department for allegedly ripping off about 1,300 military servicemembers in Guam. The company agreed to pay the fine – including $450,000 that will pay its former military customers – in a settlement agreement with the federal government where the Guam telecommunications company denies it broke the law.
“This Agreement resolves the United States’ allegations that GTA engaged in violations of the Servicemembers Civil Relief Act,” the settlement agreement states.
The penalties stem from an alleged (former) practice by GTA to impose “early termination charges on servicemembers who terminated their cell phone service contracts early under the SCRA after receiving military orders requiring them to leave Guam.”
The settlement agreement describes a contractual penalty most if not all cell phone companies impose on their customers who terminate annual or biannual contracts early. For example, if a customer pays $60 a month for phone and data service and decides to end services with the cell company 10 months in advance, the cell company would charge the customer $300, or 50 percent of the monthly cost multiplied by the number of months left in the contract.
In GTA’s case, according to the settlement agreement, “The charges at issue consist of ‘subsidy fees’ or ‘balance recovery costs’ for each month remaining on two-year contracts at the time of termination and the required repayment of contract incentives. The United States alleges that GTA required military customers to pay a “subsidy fee” of $20 per remaining contract month when they terminated their contracts early. The United States alleges the ‘subsidy fee’ constituted an early termination charge that, when charged to servicemembers who submitted qualifying military orders, violated Section 3956(e)(1) of the SCRA.”
But that wasn’t all GTA’s former military customers were charged for terminating their service with the company upon their orders to leave Guam.
The federal government also alleges that military servicemembers who presented qualifying retirement or separation orders were required by GTA to pay an additional $30 per month “balance recovery cost” for each remaining month on the contract.
Despite the allegations contained in the settlement agreement and the large fine GTA must pay, the company “does not admit the factual allegations and statements of law” in the agreement.
“To the contrary, GTA contends that it, in good faith, created its subsidy fee policy specifically to comply with the SCRA,” the settlement agreement states. “GTA’s position is that it did not have any policy that would have charged eligible servicemembers a termination fee for canceling a commercial mobile service contract in the circumstances described in the SCRA.”
The agreement notes that both parties resolved their claims by this agreement for payment of the $500,000 fine “to avoid costly and protracted litigation.”
“Servicemembers will not be penalized because of their patriotic service to our country,” said Assistant Attorney General Harmeet K. Dhillon of the Justice Department’s Civil Rights Division. “We will vigorously prosecute companies that refuse to abide by federal law that protects our great men and women in uniform who actively serve to protect our Nation.”
The $450,000 GTA will pay to its former military customers who allegedly were wronged by the company will pay the damages to those servicemembers twice over. The remaining $50,000 fine is a civil penalty, according to the Justice Department.
According to a release from the Justice Department, “Servicemembers and their dependents who believe that their rights under the SCRA may have been violated should contact the nearest Armed Forces Legal Assistance Program Office.”
As part of the settlement agreement, GTA will no longer impose or seek to collect “any early termination charge from a servicemember or a dependent of a service member” who lawfully terminates a cell phone service contract in accordance with the SCRA.
