Britain’s telecoms regulator has told the mobile phone industry that the way some firms are doing business is ‘unacceptable’ and has to change.
Ofcom were reacting to reports that millions of mobile users were being charged hundreds of pounds for handsets they had already bought as part of their deal.
Citizens Advice claimed that the practice meant consumers had been overcharged by as much as £500 million and a former top bank executive said the industry could be headed for a PPI-style scandal unless action is taken.
The charity has accused three of the main operators – Vodafone, EE and Three – of failing to reduce the monthly payments of clients after they have paid for the cost of their handset as part of their monthly fee.
Chief executive Gillian Guy, said: “Some of the largest mobile phone providers are routinely overcharging their loyal customers.
“Mobile phones are now an essential part of modern life, but the way that the cost of handsets is hidden within some mobile phone contracts gives phone providers a way to exploit their customers.
“Phone providers must now make sure that any customers staying in a contract past the end of a fixed deal have their monthly bill reduced to reflect the cost of the handset.”
Former chief executive of the British Bankers’ Association, Anthony Browne, said the mobile industry is making the same mistake as the banks did over PPI.
He said: “As someone whose job it was to restore trust in the banking industry — and to lead negotiations bringing an end to the £30 billion PPI mis-selling scandal — I can see that the mobile industry is making the same mistakes as the banks, and risks a similar fate.”
He called on Ofcom to learn the lesson from Britain’s banking regulator – the Financial Conduct Authority – and get tough ‘if it wants to be sure that the mobile industry retains the confidence of customers.’
Ofcom have now condemned the practice as ‘unacceptable’ and have opened a consultation with the industry on plans to both cut charges and improve transparency in the way phone bills are presented.
Two of the main options being considered are to force providers to automatically put customers onto a cheaper tariff once the handset is paid for or to make them advise customers of the range of cheaper sim-only deals available.
Ofcom’s consumer group director, Lindsey Fussell, said: “We’re concerned that people are not told, or cannot tell, exactly what they are paying for.
“So we are extending our work on behalf of mobile customers to ensure that handset charges are clear and fair – not just when they enter a contract, but also when their minimum period is up.”
The regulator said it had already been working with operators to try to find a solution but ‘they had not offered sufficient or firm commitments’.
Citizens Advice chief executive Gillian Guy said Ofcom should take the tougher of the two options to resolve the issue.
She said: “While greater transparency around pricing would be a step in the right direction, what people really want is not to be charged for products they already own.
“Companies should automatically stop charging people for handsets once they’ve paid them off. Of Ofcom’s proposed solutions, this is the only one that would make sure people aren’t unfairly overcharged”