Phone firms told to stop the rip-offs on fixed fees: Sneak rises add 90m to bills

Phone firms told to stop the rip-offs on fixed fees: Sneak rises add 90m to bills
Customers to be allowed cancel their contracts without penalty if bills go upOfcom said many customers do not know bills can rise in fixed term contractNew escape clause to be available to people will fixed-price broadband too

By
Sean Poulter, Consumer Affairs Editor

PUBLISHED:

00:59 GMT, 4 January 2013

|

UPDATED:

08:57 GMT, 4 January 2013


Vodafone is one of the major networks that has raised monthly charges on fixed-price contracts in the past year

Vodafone is one of the major networks that has raised monthly charges on fixed-price contracts in the past year

Watchdogs are to stop mobile phone firms making 90million a year by imposing sneak price rises on supposedly fixed-fee contracts.

Under plans unveiled by Ofcom, customers faced with unexpected increases in their monthly bill will be able to cancel their contracts without penalty.

The new escape clause will be available to those with fixed-price home broadband and landline deals too.

The cost-of-living squeeze has made deals with a set monthly fee extremely attractive because – in theory – they make it easier for customers to manage their money.

But smallprint in the contracts has allowed telecom companies to get away with pushing through controversial price rises.

Ofcom also says the networks should change their advertising to ensure new customers are given a clear warning that the monthly charge could go up.

Some 10.5million customers on fixed-price contracts have suffered rises in the past year.

At the moment, those who cancel their contract as a result are hit with penalties of 200 to 300. These would be swept away under Ofcom’s radical shake-up, which is expected to come into effect in the autumn.

Most of the major networks – Vodafone, Three and Orange and T-Mobile, which are now known as EE – have raised monthly charges on supposedly fixed-price contracts in the past year.

In most cases the increase is less than 2 a month per customer, but this has generated tens of millions in extra income for the industry.

It means that customers buying the latest handsets on expensive long-term contracts end up paying more than they expected.

HOW FIXED COSTS CREPT UP

The mobile networks are unlikely to accept the changes without a fight. Customers who reject a price rise and decide to leave a contract will probably have to hand back their handset.

The networks may also retaliate by raising the monthly charge for new contracts from the current typical level of 25 to 30 for 24 months.

Ofcom will announce a final decision on its plans in the summer, and the new regime will come into effect in September.

Claudio
Pollack, of Ofcom, said: ‘Many consumers have complained to us that
they are not made aware of the potential for price rises in what they
believe to be fixed contracts.

‘Ofcom is consulting on rules that we propose would give consumers a fair deal in relation to mid-contract price rises.’

Some
38,000 people signed up to a ‘Fixed Means Fixed’ campaign run by
consumer group Which calling for Ofcom to outlaw the price rise
rip-off.

Which estimated
that price rises on supposedly fixed-price deals have cost consumers
more than 90million over the past 12 months.

The
mobile networks insist that their terms and conditions are clear and
customers understand prices can go up. EE said: ‘We are carefully
considering Ofcom’s consultation.’