Ofcom rule mid-contract price rises should mean penalty-free cancellation
It’s not often we get to shout about an industry regulator playing a blinder, but all hats are off to Ofcom, who yesterday confirmed that telecommunications providers who offer fixed fee contracts cannot change the price in any way during the contract without allowing customers to walk away penalty-free.
Ofcom are not changing the rules, merely their interpretation of them, and current rules state that customers cannot suffer a price increase that would be ‘materially detrimental’ to customers. Ofcom now says that any price increase (their emphasis) will count as materially detrimental, which will therefore include the inflationary, or inflation-plus rises that many mobile phone providers build into their contracts. The only permissible increases will be those relating to VAT rate changes or other mandatory legal requirements.
Clearly providers are not going to be thrilled about this new regime, which will take effect in three months’ time and will apply to landline, broadband and mobile contracts, and the sneakier among them might have already planned to reduce inclusive minutes/texts etc rather than changing the headline price. Fortunately Ofcom is ahead of them there as well, stating “reducing the call and/or text and/or data allowance included in a customer’s monthly subscription price…[would be considered] a price increase – as consumers would be getting less for the same money.” The guidance does not apply to out-of-bundle costs, however, such as additional minutes/data, the prices of which can be increased at will.
From now on, providers will have to give personal and small business customers 30 days prominent notice and make it very clear that customers may exit the contract without penalty before the price change takes effect.
This is a coup for consumers (and Which! are also taking the credit for their “fixed is fixed” campaign) who can now be certain that the price they pay will not change for the length of their contract, or that they are free to leave if things do change.
Claudio Pollack, Ofcom’s Consumer Group Director said: “Ofcom is today making clear that consumers entering into fixed-term telecoms contracts must get a fairer deal. We think the sector rules were operating unfairly in the provider’s favour, with consumers having little choice but to accept price increases or pay to exit their contract.
“We’re making it clear that any increase to the monthly subscription price should trigger a consumer’s right to leave their contract – without penalty.”
Which! executive spokesman Richard Lloyd said:
“Today’s announcement from Ofcom is an overwhelming victory for the 59,000 people who joined our campaign calling for fixed to mean fixed on mobile phone contracts. Consumers told us price hikes on fixed contracts were unfair, and now people will be able to leave these contracts and switch to a cheaper provider without being hit by extortionate exit fees.”