Clamp down on unfair phone and broadband feesNew guidance from phone watchdog on hidden charges

28 December 2008

A picture of a man on a cordless phone

Organisations take a share of the profits on a number of premium-rate phone lines

Broadband, home phone, mobile phone and digital TV customers may benefit from additional protection on their phone, internet and subscription TV services following new guidance from telecoms regulator, Ofcom. 

The phone and internet watchdog has said it wants to help protect consumers from unfair charges that are often hidden in the small print of mobile phone, home phone, subscription TV and broadband contracts.

Ofcom chief executive Ed Richards says: 'When consumers shop around for the best deal, they should be able to easily assess the true cost of what’s on offer.

'We want to make sure that telecoms and pay-TV companies are up front about all their charges and, where there are small print charges, they must be fair.'

What are additional charges?

Additional fees and charges on phone, digital TV and internet services can include:

  • Non-direct-debit surcharges (if you choose to pay your phone, broadband or TV bill by cash or cheque, rather than by direct debit);
  • Extra charges for receiving an itemised or paper bill;
  • Late or non-payment fees;
  • Early cancellation fees for leaving a provider before the initial term of a phone, broadband or TV contract has ended.

New guidance on additional charges

Ofcom's new guidance on additional charges for home phone, mobile phone, broadband or subscription TV services sets out how it thinks the law applies to additional fees which any of the hundreds of companies that offer telecoms or TV services - including AOL, BT, Sky, TalkTalk, Tiscali, Virgin Media and Vodafone - may charge on top of a customer's usual bill.

Under the Unfair Terms in Consumer Contract Regulations 1999, Ofcom has said that companies offering home phone, mobile phone, broadband or digital TV services must:

  • Set out any additional charges - such as direct debit charges - in a prominent and transparent way so that customers can understand them and recognise them up front as part of the price for the services they are buying;
  • Limit extra fees to fair levels. 

Itemised billing, late payments and early cancellation fees

Ofcom has stated that charges for itemised billing should not usually be more than £1.50 per bill. In addition, charges for late payments should reflect only direct costs to the company. 

With regard to early cancellation fees, consumers who end phone, broadband or digital TV contracts early should never have to pay more than the payments left under the contract, and in fact should often pay less to reflect the costs providers save because the contract ends early.

Auto-renewable contracts

The guidance also gives Ofcom’s view about fixed-term contracts that renew automatically. BT, for example, offers a home phone package that provides free evening and weekend calls in exchange for signing up to a 12 month contract that automatically renews for another 12 months when the initial term expires.

Ofcom believes that fixed-term contracts that renew automatically are likely to be unfair if they do not give consumers something of benefit in return for the renewal and a fair chance to opt-out.

More on additional telecoms charges

Which? phone and broadband expert, Ceri Stanaway, says: 'Phone, broadband and pay-TV customers can sometimes get a nasty shock if they're hit by fees or charges that are all too often hidden away in small print of telecoms and pay-TV contracts. 

'We think that all such extra charges should be easy to find and clearly explained to customers before they take out a mobile, home phone, TV or broadband contract, so that consumers can easily compare between service providers and make an informed choice.

'All extra charges should also be fair, and should reflect direct costs to the company.'

Telecoms and pay-TV companies have until the beginning of April 2009 to make any necessary changes to their terms and conditions. After that, Ofcom will consider the best way to make sure they comply with the law.

The phone watchdog has also issued a consumer guide to additional charges offering advice on the type of charges to look for before signing up with a new mobile, home phone, pay-TV or internet provider.

If you're concerned about early cancellation fees on your broadband service, the Which? broadband review has details of how much you'll pay to end  your contract early with more than 100 broadband packages from broadband providers including BT, Virgin Media, AOL, Tiscali, TalkTalk and Orange - plus details of a range of deals from providers such as Which? Best Buy broadband provider Zen Internet that only tie you in for a month at a time. 

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