I have a coworker who's holding on to his Note 7. He's been staying on top of all of this. It appears that after a recall, a company cannot require nor continue requiring payment for a recalled device. Some may argue that he has a loan he still owes Verizon, but it appears also that Samsung bought out all those loans.
Verizon doesn't want the liability of your coworker suing them after his house burns down. Or to be sued by someone else after he burns someone elses house down, or a bus, or a plane.
If they completely discontinue service to the phones, they have a justifiable legal basis for saying that they did all that they could to prevent the phone fmor being used. They have likely decided that alienating a small portion of their customer base is worth avoiding such liability.
Also, your colleague sounds a bit daft.