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Dial-a-phone upgrade nightmare

I recently upgraded my Vodafone Contract with Phones 4 U ( Dial a phone ), as they were offering a much better deal than going direct.

I upgraded to a HTC sensation and had the phone for 3 weeks when I had a letter through the post stating my credit had been declined due to upgrading to early. Please return the handset. I then went to speak to Vodafone who said they were not aware of any issues. Since then I have had email’s from Vodafone confirming my upgraded contract. Today I have now had another letter threatening me with Court and a number of expensive cost’s if the handset is not returned.

My question is do I return the phone? I could keep the phone and end up in court, or send it back and have a 24 month contract with no phone.
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