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Ofcom consultation on curbing unfair additional charges on consumers’ bills

edited 30 November -1 at 1:00AM in Phones & TV
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edited 30 November -1 at 1:00AM in Phones & TV
Ofcom today announced proposals to curb unfair additional charges levied by communications providers on consumers’ bills.

The proposals are designed to ensure that extra charges are fair and that landline, broadband, mobile and pay-TV providers clearly market the true cost of their services.

Increasing competition has driven down headline prices and offered consumers more choice. However, falling headline prices are not the whole picture.

Consumers may also pay additional charges as part of complicated contract terms. Some providers make a range of additional charges, for example, when consumers choose to pay by cash or cheque rather than by Direct Debit; cancel a contract before the minimum period has finished; or make a late payment.

Ofcom is proposing to introduce new guidance for communications providers. This will spell out Ofcom’s view of the law and what communications providers have to do to meet their obligations under the Unfair Terms in Consumer Contract Regulations 1999 to ensure that additional charges are fair and transparent.

Once the guidance has been finalised, Ofcom is proposing to give communications providers three months to comply. Ofcom will then start an enforcement programme - where necessary through the courts.

The draft guidance has two main principles:

* providers need to be clear and up front with their consumers and do more to make it easy for consumers to understand the charges; and
* for charges that are not part of the price of a main service under the contract, these must be demonstrably fair.

The draft guidance covers a number of specific areas including:

Charges for paying bills by cash or cheque rather than by Direct Debit

* When providers advertise prices, they must make clear what any extra charges for paying by cash or cheque will be.
* If a provider does not make the extra charges prominent and transparent enough that consumers see them as part of the main price under the contract, then the charges must reflect direct costs only. They should only include the provider’s extra costs of collecting normal payments and not an opportunity to collect further revenue.
* However, where the extra charges are prominent and transparent enough, normal competition – and not regulation – will provide price discipline on behalf of consumers. Customers will then have all the information that they need to know which provider to choose.

Protection for low income households

From mid-2008, BT will offer a new service – BT Basic – which offers a low cost home phone service to those on low incomes and pensioners that are in receipt of certain government benefits. BT Basic will not include an extra charge for consumers who do not pay by Direct Debit and, in contrast to previous social telephony products, will be available to consumers who have pre-pay mobile phones and/or broadband services.

Charges for late payments and failed payments

* Providers should make consumers much more aware of these charges.
* A charge should only be made after consumers have had a fair chance to pay their bills.
* The charges should reflect only the direct costs providers incur, like the true extra cost of collecting the money.

Minimum contract periods and charges for cancelling contracts

* Providers must make the length of contracts clear, as well as the costs involved if a consumer chooses to break a deal.
* Subsequent contract periods should not be imposed unless there is a clear benefit to the consumer and cost to the provider.
* A consumer who ends a contract early should never have to pay more than the payments left under the contract period - in fact they should often pay less than this, to reflect costs providers save because the contract ends early and their ability to recoup sums by selling services to other consumers.

Ofcom is seeking views on the draft guidance. The consultation is published at http://www.ofcom.org.uk/consult/condocs/addcharges and the closing date for responses is 8 May 2008. Ofcom expects to publish the final guidance in autumn 2008.

Ofcom Chief Executive Ed Richards said: “Consumers are benefiting from greater competition and lower prices. But for consumers to get an all round fair deal they need to know the full costs of the services they are buying. Our proposals will encourage companies to be open and straightforward about additional charges where they feel it is necessary to include them. In addition, our proposals mean that, in some cases, additional charges will be subject to clear limits which would provide direct protection for consumers”

Notes to Editors

1. An illustrative example of communications services providers’ current and revised advertising following Ofcom’s guidance on non direct debit and minimum contract terms can be found here: http://www.ofcom.org.uk/consult/condocs/addcharges/mockup. The example is intended as being illustrative and is not prescriptive.

2. Frequently asked questions for consumers are available here: http://www.ofcom.org.uk/consult/condocs/addcharges/faq.
Regards
Sunil

Replies

  • Q11. Can suppliers charge what they like for non-DD?

    No.
    Setting prices for the main goods or services under a contract is a commercial decision for suppliers. Ofcom does not generally set retail charges (just as regulators in other sectors do not generally set prices). Where consumers have a choice of providers they can shop around. Competition – not regulation – will mean charges are set at a reasonable level.
    But, if some companies don’t make these charges obvious (so they’re not part of the price for the main service), consumers are unlikely to shop around on the basis of these, and competition may not work in the same way. The need to protect consumers from ‘small print’ charges is recognised by the Regulations [1] which say such charges must be set fairly. Ofcom’s guidance will set out how we think the Regulations apply and what we expect suppliers to do.
    [1] The Unfair Terms in Consumer Contracts Regulations 1999 (the Regulations).

    SOURCE:

    So it looks like The Unfair Terms in Consumer Contracts Regulations 1999 will apply but I guess will have to be tested in court.
    Ofcom’s guidance will set out how we think the Regulations apply and what we expect suppliers to do.

    Have they stated what the guidance is?
  • having read the whole report of ofcom, I find it a waste of time, just wot you would expect, still going to pay most of those non direct debit charges and late payment charges, Says nothing about BT's extortionate repair charges that went up may07 by well over 100%. nice one ofcom, hope you all had a bonus for thar report.
  • gt94sss2gt94sss2 Forumite
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    BritBrat wrote: »
    Have they stated what the guidance is?

    A summary of Ofcom's draft guidance (what they are consulting on) is at para 1.20 in their Executive Summary

    The full consultation document is here, though the best place to start reading is probably this web page

    Regards
    Sunil
  • If that Lady wins the court case later next month she may help write the guidance without the need for Ofcom.
  • gt94sss2gt94sss2 Forumite
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    BritBrat wrote: »
    If that Lady wins the court case later next month she may help write the guidance without the need for Ofcom.

    .. and if she loses, it weakens Ofcom's attempt to issue guidance?

    Regards
    Sunil
  • True, I hope the judge is a friend of hers :)
This discussion has been closed.