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While communications services providers (CSPs) are entitled to charge customers who decide not to ride out their minimum contract periods, these charges must be made clear to customers and must not make switching providers too costly.
An Ofcom investigation found that 400,000 EE customers ending their contracts early were over-billed to the tune of £4.3m, and 82,000 Virgin Media customers were over-billed to the tune of £2.8m. In addition, said the regulator, both providers failed to make these charges clear.
“EE and Virgin Media broke our rules by overcharging people who ended their contracts early. Those people were left out of pocket, and the charges amounted to millions of pounds,” said Gaucho Rasmussen, Ofcom’s director of investigations and enforcement.
“That is unacceptable. These fines send a clear message to all phone and broadband firms that they must play by the rules, in the interests of their customers.”
In EE’s case, the code breaches took place over a six-year period, affecting 15 million customers on discount contracts. The investigation found that these contract terms and conditions were unclear and would have been required to pay excessive charges to exit early.
Out of those 15 million contracts, 400,000 did leave their contract early, and were collectively billed up to £13.5m, because EE miscalculated exit charges based on the non-discount contract price. In many cases, the charges were waived, resulting in the lower £4.3m figure.
EE pointed out that it had accepted it broke the rules and co-operated fully with the investigation, and its fine has accordingly been reduced by 30%. The operator has now refunded just over £2.7m to customers, while £1.6m remains unreturnable because the affected customers can’t be identified. It has also undertaken to change its terms and reduce its exit fees.
“We accept Ofcom’s findings and recognise that we have made a mistake. We apologise to customers with discounted tariffs who paid more than they should have when cancelling their contracts early,” said an EE spokesperson.
“We’ve already refunded customers and changed the way we calculate early termination charges, and we will continue to focus on ensuring our policies are clear and fair for all customers.’’
In Virgin Media’s case, 82,000 customers were overcharged by an average of £34 per person under an early-exit charging regime that was higher than what they had initially agreed to in their contracts.
Ofcom found that this meant Virgin customers were disincentivised to switch suppliers, and that the provider failed to publish clear and current information to help customers understand the charges.
In addition to the £7m fine, the provider has been hit with an additional £25,000 charge for providing incomplete information in response to a legal request.
The supplier has now either reimbursed, or donated to charity in lieu, in respect of virtually all the affected customers, and is still trying to trace the minority that remain. It has now committed to reduce the level of its charges, and make its terms and conditions much clearer – including publishing reminders that its broadband network is not nationwide by any means, and that customers moving to a home outside its coverage area may be liable for early-exit charges.
It will also be updating its training and customer service procedures, and doing more to promote 30-day rolling broadband contracts.
Virgin fights on
While EE has accepted its fine, Virgin Media’s CEO Tom Mockridge vowed to fight the ruling in court, saying that the fine failed to take into account the remedies it had put in place.
Mockridge also pointed out that none of the 82,000 affected customers had actually changed their decision to leave as a result of being overcharged.
“This decision and fine is not justified, proportionate or reasonable. A small percentage of customers were charged an incorrect amount when they ended one or more of their services early and for that we are very sorry,” he said.
“As soon as we became aware of the mistake, we apologised and took swift action to put it right by paying refunds, with interest, to everyone affected. For those few people we could not locate, we have made an equivalent donation to charity. We also reviewed our internal processes and systems, and improved our customer communications to make sure that this does not happen again.
“We wholeheartedly reject the claim by Ofcom that our ETC [early termination charge] levels dissuaded customers from switching,” said Mockridge.
Read more about consumer rights
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- Citizens Advice is calling for a fair deal for consumers that it claims are being ripped off by out-of-contract charges by communications services providers and the financial services industry.