Sprint Nextel to pay $17.5 million to settle lawsuit over early termination fees

Sprint Nextel has agreed to pay $17.5 million to settle a class-action suit over early termination fees for cell-phone contracts.

The proposed settlement will end a case filed last November in federal district court in New Jersey. That suit accused Sprint of illegally charging $1.2 billion in early termination fees since 1999.

Sprint denied the allegations, but the carrier has agreed to pay $14 million into a fund to be distributed to members of the class action.

Another $3.5 million in non-cash benefits will be provided to the suit’s participants as well.

Customers who had a wireless contract with Sprint, Nextel or Sprint Nextel from 1999 to Dec. 31, 2008, could be eligible for a settlement if they had a claim related to early termination fees.

Sprint also agreed not to insert a flat fee for early termination into its personal cell-phone agreements in the U.S. until Jan. 1, 2011. But, until then, the carrier can charge a pro-rated termination fee

Sprint received preliminary court approval to settle this case last December. A final hearing is set for Oct. 21.