Following Citizens Advice’s report that mobile network providers were overcharging 4 million customers, Ofcom is “now consulting on plans to cut charges”.
Three of the four major network providers, EE, Three, and Vodafone, are overcharging their customers by allowing customers to stay on their original contracts. This means that customers continue to pay for mobile phones that have already been paid off, on top of paying for the network service, resulting in upwards of £500 million in unnecessary charges. This practice has been labelled “unacceptable” by Ofcom as well as by Gillian Guy, CEO of Citizens Advice.
While Ofcom believes “most customers receive good value for money”, it is concerned about the millions of customers who are being overcharged. The regulator is committed to finding a solution to the problem of these extra costs. Ofcom is equally committed to increasing the transparency of contract costs which often confuse consumers.
Ofcom is now considering different avenues of change to prevent this overcharging:
The first option is to “force operators to put customers on a cheaper tariff once the handset has been paid for”. Rather than continuing to pay up to £37 a month, the customer would automatically be moved to a SIM-only contract. SIM-only contracts can reduce the monthly cost to less than £10.
The second option is to have providers do more to ensure that customers are better informed about SIM-only offers. This would require the providers to clearly “break down the different costs within a contract” and to notify the customer when they are at the end of their contract.
Ofcom states that consumers need to be “automatically notified when they have finished paying for the phone itself”. By doing so, consumers will be aware of what they should be paying going forward. Many of the smaller providers, as well as O2, are already doing this.
There is concern that the consumer is not made aware of what exactly they are paying for within bundled phone contracts (those that include services and the phone handset). Lindsey Fussell, Ofcom’s consumer group director, has said: “we are extending our work on behalf of mobile customers to ensure that handset charges are clear and fair—not just when they enter a contract, but also when their minimum is up”.
Citizens Advice is clear in where it stands. While Gillian Guy agrees that transparency is “a step in the right direction”, what consumers are actually demanding is for all overcharging to be stopped. People should not be charged for the products they have already paid for in full. Only the first of Ofcom’s suggestions would accomplish this.
Despite the willingness of providers to work with Ofcom to find a solution, Ofcom has said that these providers “had not offered sufficient or firm commitments”. This may signal a reluctance to end the lucrative overcharging.
According to Money Saving Expert, “Ofcom will be seeking comments on these proposals until 7 November” with the results published the following year. It adds, that while there is no “definite timescales” for the proposals to be implemented, it could be as soon as “early next year”.
