Ofcom has announced a new “fairer deal” for telecoms customers in the UK. It also makes price rise issues and consequences clearer for people. From 23rd January 2014 customers and small businesses taking out new contracts “should be allowed to exit their landline, broadband or mobile contract without penalty if their provider increases the cost of their monthly deal”. This applies to any increase. Also providers should give customers 30 days notice of such increases so customers can exit the contract without rolling over into the next billing period.
Currently the provider of your landline, broadband or mobile contract can raise prices of its services mid-contract, as long as it isn’t considered to be “materially detrimental,” which is usually understood to be in line with the rate of inflation. Because of the nebulous nature of the phrase “materially detrimental,” it’s been hard for customers to break contracts when providers tweak monthly contract prices in the past.
“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,” said Claudio Pollack, Ofcom’s Consumer Group Director. “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.”
The new Ofcom guidance is summarised as follows:
- Ofcom is likely to regard any increase to the recurring monthly subscription charge in a fixed-term contract as ‘materially detrimental’ to consumers;
- providers should therefore give consumers at least 30 days’ notice of any such price rise and allow them to exit their contract without penalty; and
- any changes to contract terms, pricing or otherwise, must be communicated clearly and transparently to consumers.
So what if a provider takes a different tack and instead of nudging up your price instead decides to reduce your call, text or even data allowances? While the guidance does not apply to non-price changes to contracts - “Ofcom would regard such action as a price increase – as consumers would be getting less for the same money.”
To communicate price rises or other contract modifications to customers, letters from providers must be clear and mention the subject up front; on the front page or in the title of an email. Cancelation options should also be made clear.
Remember this ruling will come into effect only on new contracts, signed after 23rd January 2014.
