ADT's home security contracts: A protection racket?

ADT's home security contracts: A protection racket?

Summary: That "free" ADT home security system could end up costing you a lot of money if you want to escape from your contract.

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In July of 2012, I sold my home in New Jersey and moved to South Florida. At the time, for the new house, I was looking for a comprehensive home automation solution that included broadband, subscriber premium television as well as home security/lighting & thermostatic control/fire & carbon monoxide detection.

I ended up going with AT&T U-Verse as my broadband and television provider. I really wanted to get AT&T Digital Life, which would have allowed me to do all of the above from a single application, but the company was about six months away from deploying it in my community.

Rather than go without a security system, I signed up (through an AT&T referral link during U-Verse provisioning, which almost certainly netted them revenue) for ADT.

I also ended up buying a NEST for home thermostatic control because ADT didn't have an equivalent product at the time.

For the ADT setup, I paid a $77.00 installation fee and I have a recurring bill for central station monitoring that is $52.99 a month. I thought it was a relatively good deal at the time, and the security monitoring and mobile app, ADT Pulse, has served its purpose.

But I've always wanted something much more integrated that did more. Google's acquisition of NEST this week for $3.2 billion has yet again piqued my interest in AT&T Digital Life, which is now avaliable in my area. ADT now has a comparable system, but I would prefer to deal with one vendor.

I had the AT&T sales technician over this morning to see what it would take to replace the NEST, the ADT system and add some additional functionality, which includes smartplugs for interior and exterior lighting automation control.

The equipment setup cost would be $450, and the monthly bill about $50.00. That would include a single smartphone/tablet app as well as a web portal that I could use to control everything in my house. 

I was ready to sign on the dotted line and schedule an installation appointment, but I realized that there was still some time on ADT's central station monitoring contract.

I thought it was about six months, thinking it was a two-year contract, but after calling in and expressing my desire to terminate, I was told it was a three year contract (which is standard for ADT) and that the termination fees would be approximately $596.00 because the system was free and it would be equivalent to 75 percent of the remaining contract monthly fees ($795.00).

[1/16/2014 Editor's note: the above paragraph has been corrected to reflect's ADT's pro-rated contract termination policy. A previous version of the text indicated it was not pro-rated, but based on equipment cost.]

First, I think this is ridiculous on a number of grounds. ADT's equipment lay out is a cost of doing business, and their contract termination fees should not be excessive.

Second, they can re-use and recondition any equipment that gets de-provisioned from a household, and there isn't significant wear and tear on the central station device, wireless door sensors and smoke detection unit, like you might have with an expensive smartphone on a wireless services contract.

I asked the AT&T DigitalLife sales technican if they would be willing to absorb the termination fee in order to gain my business. He called into his manager, and they weren't able to authorize it.

AT&T is asking for $450 in equipment costs, now they also want me to eat $600 in termination fees from their former partner, now turned competitor as well? Doesn't seem right, and doesn't seem like an effective strategy for winning over new households.

I think AT&T should take responsibility for this because they referred me to ADT in the first place, they made revenue on the relationship during the signup process and they must realize that there are many other people in my community that are in the same boat. At the very least, subsidize the hardware so it's not a total loss.

So now I'm stuck with an ADT security system I no longer want, and I have to wait another year and a half to pull the thing out.

ADT is currently facing a federal class action lawsuit in the state of California for excessive and anti-competitive termination fees. I wouldn't characterize these simply as high termination fees, however. I'd call this a protection racket.

Have you tried to escape your ADT contract, only to face excessive termination fees? Talk Back and Let Me Know.

Topics: Security, Tapping M2M: The Internet of Things

About

Jason Perlow, Sr. Technology Editor at ZDNet, is a technologist with over two decades of experience integrating large heterogeneous multi-vendor computing environments in Fortune 500 companies. Jason is currently a Partner Technology Strategist with Microsoft Corp. His expressed views do not necessarily represent those of his employer.

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Talkback

49 comments
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  • I wish....

    ...I had known about this before I signed up with ADT in November. I truly detest strong-arm tactics of any nature. I learn as I go along and will do my due diligence before entering any other ridiculously long agreements with any other companies.
    missparker0106
  • Ridiculous

    Look up "contract". I do not know why you and countless smart phone users think that they should somehow be let out of a contract when it suits them.

    If you do not read and understand the terms/conditions, don't sign. Once you sign, you have agreed and have to accept the consequences. That is the nature and purpose of contracts, full stop.

    Stop the whining, man up and accept it.
    Economister
    • There are contracts, and there are reasonable termination fees.

      If ADT had said they would charge me $200-$250 to escape, like most cellular contracts do (and I would regard the equipment cost in this case comparable to a medium-end smartphone) then I would not have written this piece. But the fees are unconscionably high in ADT's case, and the fact that there is class action litigation to address this reinforces my point.
      jperlow
      • Ridiculous II

        Termination fees may be set by the contract terms, and if not specified, you have NO right to terminate without fulfilling your obligations.

        If you don't like it, don't sign. Like I said, read up on contracts and stop whining.
        Economister
        • Re: Read up on contracts...

          "If you don't like it, don't sign. Like I said, read up on contracts and stop whining."

          The written word on contracts isn't always the final word though, Economister. Written laws override the wording on contracts - always.

          In most (if not all) states there are legal limits placed on contracts in terms of what types of fees can be charged for the cancellation of the contract. Only fees that would cover what could reasonably be considered the loss of revenue from the cancellation could be charged - punitively high fees aren't enforceable on contracts. These laws generally exist to avoid loopholes that could otherwise be used to allow illegal excessive interest on loans, etc.

          That being said, $600 to cancel 18 months of service at $50/month may be considered reasonable. The only person that can make that distinction is a judge - and I don't think $600 is enough to make it worth Jason's while to turn into a court battle (this is why class-action suits exist). I will say, though, Jason is being pretty disingenuous in looking at a reasonable cancellation fee through the lens of a cheap disposable smartphone. There is labour and setup involved in getting his equipment on line, and there is likely a pretty rapid decline of value of the equipment after it is installed, regardless of how little wear it gets.

          Also, thinking that AT&T should pick up the bill because they added a link on their website to ADT (don't think that quite qualifies ADT to be AT&T's "partner") is pretty laughable. In the end Jason will either stick with what he's got, or suck it up and go with what he wants. He at least has had a glimpse of the level of customer service (read: zero) that he can expect from either of these companies.
          daftkey
        • Contract Law?

          Economister,

          Please reread the last sentence of your post and follow instructions.
          If you need additional help understanding the material, the Consumer Protection Bureau's website provides extensive information and links to other resources.

          So, Mr. 1L, please drop the know-it-all attitude and wait until at least second semester to express your 19th c. understanding of contracts. Then "stop whining".
          A.E.G.
      • how is it the same?

        ADT is a much more involved service than just a cell phone one? If anything, it is the cell phone contract that looks ridiculous, $200-300 termination fees for what? Ah,,, the phone that was subsidized. ADT invests in the equipment they installed in your house. I bet they have to re-certify all the equipment if they want to remove it from your house and reuse it. The three years vs two years problem,,, you must be kidding. Read the contract. It is totally your fault. Read the lawsuit link. The increase in their service fees is a much more serious problem, imho. Although it is also written in the ADT contract. So WHY did you sign the contract? AT&T provided you with a link and now AT&T is responsible for the termination fees. Seriously?!
        pupkin_z
        • Unless things have radically changed ...

          ... ADT doesn't recover, repair, "re-certify" [ whatever that means ... the stuff isn't "certified" to begin with ] or reuse equipment. You buy the package from ADT you pay for everything. You are not renting the home security hardware, you are purchasing it. You want out of the contract? Pay an ETF. You keep the hardware no matter what.

          That being said, ADT does in fact use bully tactics to prevent customers from leaving, and occasionally commits fraud. I had ADT about a decade ago for home security ... I was on a 2-year contract and at exactly 2 years and 1 week I called to cancel the service. It was a nightmare of jumping through hoops, and they did not actually stop billing for 2 whole months (they claimed that it took that long to stop the service, an obvious lie).
          Gravyboat McGee
      • Did it say this in the contract?

        I don't see how ATT is responsible, they simply told you where to go. If it said what the contract cancellation fee was in the contract, I don't see the issue.
        Stuart Becktell
        • "telling me where to go" is an understatement

          They promoted ADT as their partner, and profited from the customer referral.
          jperlow
          • Must use AT&T's proprietary equipment?

            Some security firms will let you re-use your existing system, when you change. I hear radio ads all the time. AT&T demands you use THEIR system?
            ChazzMatt
          • AT&T's stuff is newer technology

            It's a new system, the base unit and the sensors are totally different.
            jperlow
          • You are looking in the wrong direction, Jason.

            Your tale is an example of what I like to call "the problem with people making dumb decisions that have a negative effect on us all" ... nuttin personal, J-dawg, just sayin ... you should *not* be seeking to subscribe to a home-automation service from anybody ... you are simply encouraging companies like ADT and AT&T to continue to screw over the consumer market.

            You *should* be seeking to *purchase* a wholly-integrated in-house home automation system that you *own* and manage yourself. You don't need any external service provider to manage your ding dang house, man! An app on your tablet or phone to manage the system? Why would you need a subscription for that? Any reasonably competent company that can create the home automation system to begin with can also create an interface and control app that requires absolutely NO external interference. Your home, your computer, your control, nobody else needs to have any access.

            There is nothing that ADT or AT&T actually do that is worth a subscription and handing them the keys to your home. Many of these new systems they are pushing include things like cameras in your house, and remotely controlled door locks. Do you really want some bored minimum wage assclown a hundred miles away randomly observing your activities in the middle of the night or playing with door locks at random intervals?

            ADT is a big fat rip-off (all home security monitoring services are, in fact, worthless rip-offs). Unlike those commercials where you see some photogenic person in a high-tech control center who shows concern when your alarm goes off, what in fact happens is that an AUTOMATED call is sent to the local police agency. The cops try to investigate, and will dun you for false alarms which are CONSTANT if you have any pets or kids (the only way to avoid false alarms is to turn down the sensitivities [ in the case of motion detectors ] or disable certain monitors [ smoke alarms that go off due to steam from overzelous showering, or door alarms that go off because children can't be expected to punch in security codes every time they run in and out ] to the degree that you actually no longer have any meaningful monitoring).

            There is NOTHING that these 'service providers' actually do that you need. The main worthwhile functionality should be (might already be) available to you as a stand-alone package that you purchase, not rent or "subscribe" to.

            Here's what I want from you now ... go seek such a system. Find it. Buy it. Install it. Review it. Tell us about it. Prove me wrong if you can, or face the truth that "service providers" are just crooks seeking a way to have a permanent suction device attached to our wallets.
            Gravyboat McGee
          • I did my own...

            But that isn't for everyone. On the other hand, I'm sure Jason could handle it if he wanted to.

            My system wasn't cheap by any means; the initial cost was quite a bit more than what Jason spent on his ADT system and what AT&T quoted, not counting the monthly fees. If you take the monthly costs into account, then yeah, he paid more than I did for my system. :)

            Anyway, there are several options if you want to do this sort of stuff yourself. I found the whole process to be quite fun (currently thinking to myself, "Oh boy... I'm a geek!).

            As Gravyboat mentioned, some of these installers can be of questionable nature. I've known a few local installers over the years (not ADT) and what I know about them does make me leery of using a service. Two guys I used to know changed the alarm code on a house while the family was away on vacation to get a laugh when they returned; they did a lot of stuff like this. And another company I used to deal with on a commercial account always kept alarm codes for their installs on file back at their office. The latter company was a solid, reliable, respectable company; but I was never comfortable about them keeping codes to our system on file and forced them to provide me access to change them so that they had to get codes from me instead.

            Anyway, doing it yourself is definitely a rewarding option if you're into that sort of thing.
            kb5ynf
          • Agree!

            I just typed the same thing in my post below. Two companies that I know of Home Security Store and Alarm Relay are all anyone needs. Home Security Store provides the equipment and many are the same make and models offered by companies like ADT while Alarm Relay offers professional monitoring at something like $9 per month (may even be less, but I don't have time to check). It's ridiculous how dependent people have become on these nationally known companies and somehow feel like they're better based on brand recognition. They're not. They are total ripoffs when you compare prices and the fact that there's no need to go through them in order to get a security system or monitoring. Anyone interested can go to Consumer Affairs' website to learn how many complaints and lawsuits some of these big names have against them for deceiving consumers and trying to force them into paying far more than services are worth. Good post and very well-stated, Gravyboat McGee. Hopefully, more people will investigate and learn how to take control of their home security without getting ripped off or stuck in a contract.
            SydneyB
          • you did read the contract and agreed to it, though?

            so how is it AT&T's responsibility now to eat the termination fees _you_ agreed to?
            vpupkin
      • personal responsibility

        Read up on Personal Responsibility, and don't expect someone to babysit you through reading terms & conditions on your contracts. While I agree that ADT is a POS company in their contract terms, they are clearly spelled out, and should be reviewed by...wait for it...you!

        Please don't tell me the tech community is turning into a victim class just like half of society is. Become a victim by your own unwitting actions, then whine about it and demand redress.
        dhindublin
      • ADT is UNSECURE

        My experiance with ADT was absolutely terrible - they were contacted for the purpose of canceling a previous employees access code - they did NOT do as requested (after ASSURENCE that the code was cancled .
        The next workday - Tuesday ( we were off Sun & Mon) I arrived to find the x employee had entered , using his "supposedly cancled" access code . I ran him off , but later discovered a 3000 theft - I then informed ADT that they had basicaly violated the terms of the contract , and wished to cancel -- it cost me 1900 bucks - but I needed to get a system that WORKS - I now have Frontpoint - cheeper , better , more secure . No Phone line involved.
        I will continue to tell my story as often as I can untill I "fall off the perch" , so to speak. ADT - Absolutely Disasterous Tech.
        ADTvictum
        • Me too

          I have asked for a report on when my alarm was armed and disarmed. Told me impossible to retrieve. When I lived in another state that info was readily available. NOT with ADT, had I have known this I would not have chose ADT
          Veronica42
    • Response to economister

      ADT employee are you.
      Veronica42