The service provider is subject to rules that limit the cancellation fees that can be charged. These rules provide that, with certain exceptions, the service provider cannot charge cancellation fees for an open-ended cellular telephone contract.

Exception: cancellation charges permitted

Merchants can charge cancellation fees when they allow you to:

• pay less than the total price of the cellular phone at the time the contract is concluded;
• and that the outstanding amount decreases progressively as each month of the contract elapses.

The later you cancel your contract, the lower the fees will be.

Calculating cancellation fees

Here is the formula to calculate the maximum cancellation fees that you can be charged if the exception applies.

[Amount of the unpaid portion of the sales price of the telephone when the contract was signed] - [1/48 x Amount of the unpaid portion of the sales price of the telephone when the contract was signed x Number of months elapsed on the contract] = maximum cancellation fee

Sample calculation of the maximum cancellation fees

When you concluded your contract, the merchant provided you a cellular phone worth $150. You did not pay this amount. Each month, the service provider reduces the sum of $150 by a certain amount. You decide to cancel your contract in the 22^nd month.

To calculate the maximum fees that you can be charged, the service provider must apply the following formula.

$150 - [1/48 x $150 x 22], simplified as $150 - $68.75 = $81.25

The maximum cancellation fee is $81.25.