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Ofcom bans rollover contracts

Improved landline & broadband switching options

Ofcom bans rolling contracts

Ofcom bans the sale of rolling contracts from December 2011

Ofcom has confirmed that broadband and landline providers will be banned from issuing rollover contracts from December 2011, thus removing barriers to switching.

The ban of rollover contracts, also known as Automatically Renewable Contracts (ARCs), will apply to both residential and small business customers. 

As well as banning the sale of these contracts, Ofcom will also require communications providers to move all customers currently on rollover contracts to alternative deals – a move that must be completed by December 2012.

What are rollover contracts?

Rollover contracts tie customers into repeated minimum contract periods unless they opt out. For example, if you have signed up for a 12- or 18-month renewable contract, once this time is up you’ll automatically be locked in for another 12 or 18 months unless you actively opt out. This could leave you with a hefty cancellation fee if you want to switch providers. 

According to Ofcom, BT is currently the largest communications provider in the UK offering these contracts. It estimates that approximately 15% of UK residential customers are on rollover contracts.

Which? and rollover contracts

Which? has been concerned about rolling contracts for some time and investigated the issue in March 2010. Many of the people Which? spoke to at the time said they’d been caught out.

Which? was concerned that this was a barrier to consumers looking to switch services to a better deal. Which? shared these findings with Ofcom at the time, complaining that the placing of the burden to actively opt out of a contract on the consumer was unfair.

Dr Rob Reid, senior policy advisor for Which?, said: ‘We are pleased to hear that Ofcom has followed this policy line, one that Which? supports, despite many major telecoms providers pushing for ARCs to be maintained’.

Ofcom Chief Executive Ed Richards said: ‘Evidence shows that ARCs raise barriers to effective competition by locking customers into long term deals with little additional benefit. Our concern about the effect of ARCs and other ‘lock in’ mechanisms led to our decision to ban them in the communications sector.’

There are many phone and broadband providers that don’t tie you in to a long contract at all. Out of seven Which? Recommended Providers in our latest survey, five offer a one month or short contract option.

More on this…

  • Which broadband providers make it to Which? Recommended Provider status?
  • Find out more about your rights, our experts answer common questions on phone and broadband contract terms
  • Which? broadband review – check how your provider measures up

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