Following an investigation into early exit charges, telecoms watchdog Ofcom has issued fines of £6.3 million to EE and £7 million to Virgin Media after concluding they had levied excessive charges to their customers who had ended their contracts early.
While it is established that phone and broadband companies can charge their customers who decide to exit a contract early, Ofcom said those charges must be made clear to those customers and should be at reasonable levels.
During their investigation they found that some 400,000 EE customers had been charged up to £4.3 million in total for early exit while almost 82,000 Virgin Media customers were overcharged £2.8 million.
EE and Virgin Media broke our rules by overcharging people who ended their contracts early. Those people were left out of pocket and the charges amounted to millions of pounds.
That is unacceptable. These fines send a clear message to all phone and broadband firms that they must play by the rules, in the interests of their customers.- Gaucho Rasmussen: Director of Investigations and Enforcement, Ofcom
Ofcom’s rules state that all consumer contracts must specify, ‘any charges due on termination of the contract in a clear, comprehensive and easily accessible form.’ This means, said Ofcom, that consumers should have the information about their contracts in a clear and accurate form, so they know their rights and obligations and make informed decisions about the right services to buy.
In the case of EE, a six-year investigation found that the terms applying to EE’s discount contracts did not clearly set out the charges to mobile customers would have to pay if ended early.
400,000 customers exited early from their contracts during the period and were collectively billed up to £13.5 million. While some affected customers did not pay the charge and EE waived others, the final bill came to £4.3 million.
In light of these findings, Ofcom has fined EE £6.3 million for its failings. EE agreed to change its terms and significantly reduce its charges. EE has refunded just over £2.7 million to the affected customers, although this means up to £1.6 million cannot be refunded.
EE also volunteered to conduct an in-depth review of its processes and systems to help secure its future compliance with our rules.- Ofcom press release: Ofcom
Ofcom found with Virgin Media that the telecoms company had levied early-exit charges that were higher than customers had agreed to when they had signed-up to their residential contracts.
Ofcom found they overcharged 82,000 customers at an average of £34 per person. Ofcom also found some 6,800 customers had been overcharged more than £100.
As well as failing to publish clear and up-to-date information on its website on early-exit charges, Ofcom found those charges disincentivised customers from switching to another provider.
Virgin Media has reimbursed or made donations to charity in respect of 99.8% of affected customers and the company is continuing its efforts to trace remaining customers in order to refund them. In the event it is unable to trace these customers, it will donate the remaining refunds to charity.- Ofcom press release: Ofcom
Despite Virgin Media not providing complete information to Ofcom, the watchdog has decided to close its investigation into the fairness of Virgin Media’s home move policy. This was decided after Virgin improved its transparency of data and the decision to allow home movers to roll over an existing contract to a new address within the Virgin Media network.