Ofcom cracks down on 'unfair' phone chargesFees for non-debit payments to be clearer

28 February 2008

Phone companies have been warned they could face court action if they sting consumers with unfair extra charges.

Industry regulator Ofcom says that, while headline prices of landline, broadband, mobile and pay TV services have fallen, consumers are still facing additional charges as part of complicated contract terms.

These include fees for paying by cash or cheque rather than by direct debit - which can be up to £5 a month extra - or charges for cancelling a contract before the minimum period has finished or for making a late payment.

Ofcom has now announced guidance in a bid to make these extra charges fair and transparent.

Direct debit

Once this guidance has been finalised - due to be autumn this year - Ofcom will give telecoms providers three months to comply.

If they don't they'll face action, possibly through the courts, Ofcom said.

Under the draft guidance, telecoms providers must make clear what any extra charges for paying by cash or cheque will be.

If they don't make these charges prominent and transparent enough that consumers see them as part of the headline price, then the charges must reflect direct costs only.

Late payments

Telecoms companies will also have to make customers much more aware of charges for late and failed payments, and impose the charge only after customers have had a fair chance to pay their bill.

These charges should also only reflect the direct costs of collecting the money.

Providers will also have to make the length of contracts clear, as well as the costs involved if a consumer chooses to break a deal.

Ofcom says consumers who end contracts early should never pay more than the amount left under the contract period.

Open

Ofcom Chief Executive Ed Richards said: ‘Our proposals will encourage companies to be open and straightforward about additional charges where they feel it is necessary to include them.

‘In addition, our proposals mean that, in some cases, additional charges will be subject to clear limits which would provide direct protection for consumers.’

True costs

Which? technology expert Ceri Stanaway said: ‘Attractive headline prices for telecoms services often reflect the lowest price that customers will pay, while additional charges such as non-direct debit fees are hidden away in the small print, leaving people angry and upset when they're hit with unexpected costs.

‘Forcing companies to make such charges clear upfront will help people compare deals, and may mean lower fees. We particularly welcome Ofcom's findings on cancellation fees.'