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Phone leasing can be costly, consumer groups say

(ran HT)

Jordan Clark was outraged when he learned that his 87-year-old father-in-law, in failing health and living on a fixed income, had spent more than $1,000 leasing two rotary-dial telephones since the breakup of AT&T in 1984.

Clark, who is president of the Washington, D.C.-based United Homeowners Association, is concerned that other consumers, many of them elderly, are unnecessarily spending precious resources to lease telephones they could have bought for as little as $25.

"It's a windfall for AT&T," Clark said, "and we think it is time to make sure that consumers have the information they need to make the right decision, which 99 times out of 100 is to buy your own telephone."

"AT&T is just taking advantage of a situation," he added. "Where does profit leave off and greed begin?"

AT&T spokesman David Bikle defended the company's leasing program and disputed the consumer groups' claims.

"We claim that people know, when they get a monthly bill separate from their telephone bill, that they are leasing" their phones, Bikle said, pointing out that more than 60 percent of those who lease telephones also own one or more phones.

Joining forces with the National Council of Senior Citizens and the Gray Panthers, Clark asked the Federal Trade Commission (FTC) in March to investigate the AT&T leasing program. Although the FTC has responded that it does not have jurisdiction over the issue, consumer groups still plan to pursue their complaint with another agency, the Federal Communications Commission (FCC).

Leading consumer advocates such as Esther Peterson, former White House counselor on consumer affairs, have joined in the fray.

"These leasing programs are unfair to those consumers who may not know how easy and inexpensive it is to purchase their own phones," Peterson wrote to the FTC on behalf of the United Seniors Health Cooperative , of which she is a board member. "It's a ripoff that has to stop."

AT&T continues to lease phones to about 6-million customers each year for a minimum of $4.45 per month for a basic corded telephone. The charge is higher for multiple phones, cordless or speaker phones or those with additional features such as caller-ID or an answering machine.

"It is our belief that many of these consumers are elderly people who maintained their leasing arrangements after the AT&T breakup 10 years ago," Peterson wrote in a letter that was co-signed by former FTC commissioner and fellow USHC board member Mary Gardiner Jones.

"We feel that AT&T and other companies leasing their telephones have done a wholly inadequate job of informing consumers about the potential savings from purchasing their telephone," they wrote.

Peterson and Jones suggested that AT&T and any other companies leasing telephones should disclose the true cost of leasing, in easy-to-understand language, on customers' monthly bills.

They also propose that total leasing charges should be no more than three times the fair market cost of the telephones and that companies should allow customers to buy leased telephones at their depreciated value.

"The bottom line is that senior citizens living on fixed incomes can ill afford to waste money simply because they are not being provided adequate information to make informed decisions," they wrote. "If AT&T and other leasing companies are unwilling to provide consumers with this information voluntarily, we firmly believe the FTC should require it."

But the FTC responded that it has no authority over telephone leasing arrangements since common carriers like AT&T are exempt from federal regulation barring unfair acts and deceptive practices.

Peterson was irate. "That's ridiculous," she said in an interview. "They're dodging the real issue. If they wanted to do something about it, they could."

Peterson and other consumer advocates vowed to pursue this issue with the FCC. They urged consumers to speak up and to check their phone bills to make sure they are not unwittingly leasing equipment that they could easily purchase outright.

AT&T spokesman Bikle said the company doesn't think customers who lease phones are confused. "They just want the added security of knowing they can trade a phone in for a different model" or for a new one if theirs breaks, he said. It's also a good way for consumers to test phones with new features before deciding whether to buy one, he added.

Bikle, who volunteered that he leases one phone and owns several others, said customers who lease telephones from AT&T range from teen-age college students to senior citizens, with an average age of over 50.

"We think it's important for people to have a choice," he said, "but we're not pressuring them to do one thing or the other."

Mary Beth Franklin is a Maturity News Service columnist.