One in three ‘bundled’ customers are still being charged the full price of their contract even after paying off the cost of their handset, research by Which? has revealed.
Despite voluntary commitments being secured by Ofcom last year that aim to help reduce prices for out-of-contract customers:
- Some 36% of customers whose contracts have ended in the last two months are still overpaying on their bill
- We found that 43% of Three customers whose contracts had ended in the past six months claimed they saw no price drop at the end of the term
- Some customers could be potentially overpaying by more than £400 a year.
Analysis by telecoms regulator Ofcom, published in July 2019, suggests that out-of-contract bundled mobile customers could be collectively overpaying around £182m per year.
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What are mobile contract overpayments?
Most bundled mobile phone contracts include a single monthly charge that factors in the cost of the handset, and a bundle of minutes, messages and data. At the end of the contract period, the mobile phone repayment portion of the bill should no longer be charged – the cost of the phone has now been paid off.
But in our recent survey of 4,006 UK adults in July, including 856 people who have had a mobile phone contract expire in the past 12 months, we found that 36% of customers whose contracts have ended in the past two months are still overpaying on their bill.
Voluntary commitments from most of the big providers who offer bundled deals, which came into effect in February 2020, are intended to reduce the chance of this happening. Providers have taken different approaches to how these commitments are applied and some don’t go far enough.
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EE, Three and Vodafone customers overpaying
The number of customers affected by these overpayments is significant. Some 43% of Three customers whose contracts had ended in the past six months claimed they saw no price drop at the end of the term.
Also, 40% of EE customers saw no drop in price during the same period, as did 31% of Vodafone customers.
Vodafone has said that three months after a contract ends, it will reduce the price of the contract by £5 per month. EE has said it will apply a 10% discount after the same period, but Three has decided not to apply any discount to bundled customers when their contracts end.
Discounts applied by EE and Vodafone only come into effect three months after customers have gone out-of-contract, which means that some of these customers may not have yet seen a change in their monthly costs.
How much could you be overpaying on a mobile phone contract?
As you can see from the table below, which shows the current contract prices for two popular smartphones, even when the discounts offered by EE and Vodafone are taken into account, it’s likely that they will be insufficient to offset the overpayments.
Potential overpayment for ‘big four’ mobile provider customers after contract end
|Phone||Provider||Monthly cost during contract||Monthly Cost after end of contract*||Equivalent Airtime deal||Overpayment £ per month|
|Samsung S20 5G||Vodafone||£64.21||£58||£30||£28**|
|Samsung S20 5G||EE||£69.25||£61.20||£35||£26.20**|
|Samsung S20 5G||Three||£53.67***||£59||£22||£37|
|Samsung S20 5G||O2||£66.50||£33||£33||£0.00|
All 24-month contracts with unlimited data, monthly cost during contract includes upfront cost and takes into account any differences in price over duration of contract
* Includes discount for EE and Vodafone applied after three months from contract end. Provider discount is 10% with EE and £5 with Vodafone.
** Shows overpayment amount following discount applied three months after contract end
*** Includes discount over the first six months of contract
Overpayments could cost hundreds per year
Based on current contract costs, a Three customer with a Samsung S20 5G phone could end up paying £37 a month – or £444 a year – more than the provider’s equivalent airtime deal for their bundle.
A Vodafone customer with an iPhone 11 could still be left paying £32 a month – or £384 a year – more than they need to for an equivalent airtime deal after the providers £5 per month discount is applied. Meanwhile, an EE customer with a Samsung S20 5G phone could still be overpaying by £26.20 a month – equivalent to £314 a year – even with the 10% discount applied.
End of Contract Notifications (ECNs), are now required to be sent to customers between 10 and 40 days before a contract comes to an end. Those with bundled mobile contracts should also be told about at least one Sim-only deal. Providers told Which? that they have sent end-of-contract notifications to all customers as they are required to, but that some notifications may have been missed.
Out-of-contract bundled customers on O2 (direct and Carphone Warehouse customers), Tesco Mobile and Virgin Mobile are less likely to face such hefty overpayments, as these providers told customers they would see their bills reduced to the equivalent 30-day, or best available, airtime deal.
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Mobile providers respond
EE said it’s wrong to suggest it isn’t fulfilling its commitment to Ofcom’s fairness measures and has been contacting mobile customers as required.
It also reiterated the 10% discount offered to customers once they have been out of contract for three months and said that it ensures customers are fully informed about contract pricing.
Three said that discounts on tariffs are ‘arbitrary’, that it puts customers first and has some of the lowest prices on the market, allowing them to choose what they do when they reach the end of the contract. It also reiterates that it does send notifications as required, and that it’s working hard to create a market where customers are engaged and happy.
Vodafone did not respond to our request for comment.
Which? calls for an end to overpayments
While Which? welcomes the commitments made by some providers, which have improved the situation of many out-of-contract bundled customers who are overpaying, it believes that EE and Vodafone should have gone further to ensure that customers are not overpaying when their bundled contract comes to an end.
In the case of Three, Which? believes the lack of discount for affected customers is insufficient and is not aligned with being a signatory to Ofcom’s voluntary Fairness for Customers commitments. This means that those customers will continue to overpay, potentially by significant sums.
Which? is now calling for the regulator to review whether mobile providers are truly treating their customers fairly when it comes to mobile contracts which currently could still leave many people out of pocket.
Natalie Hitchins, head of home products and services at Which?, said:
‘While some mobile firms have taken action to end overpayments, our research suggests that others could do a lot more to ensure that customers are not being exposed to rip-off charges.
‘Ofcom should ensure that all providers are treating their customers fairly and have taken enough steps to stop people overpaying. In the meantime, it’s really important that customers don’t wait. If you think you might be out of contract or overpaying, check your phone bills to see if you can save money with a Sim-only deal or with an upgrade to a new phone.’