Ofcom protects against mid-contract price rises

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The regulator said it had reached an important “milestone” today (January 23) by ensuring consumers and small businesses hit by mid-contract price rises can switch mobile provider without penalty

Consumers and small businesses hit by mid-contract price rises can now switch mobile provider without penalty.

The decision, which was made by Ofcom last year but comes into effect today (January 23), is part of the regulator’s efforts to protect consumers from mid-contract price rises.

New guidelines state that if a provider wishes to increase the monthly subscription price (or prices) agreed by the customer at point of sale, customers should be given at least one month’s notice of the increase and be allowed to exit the contract without penalty.

It also states that any changes to contract terms, pricing or otherwise, must be communicated clearly and transparently.

The guidance does not apply to price increases for services outside of the regular subscription price, for example international calls and premium rate numbers. However if these increase to the extent that it will have a “materially detrimental” impact on the consumer, providers should give them a chance to exit the contract.

It also does not apply to SIM-only and prepaid mobile services, or home broadband deals.

Ofcom said it will monitor providers’ application of the guidance and complaints closely to assess its effectiveness, and conduct research such as mystery shopping to assess the clarity of mobile phone contracts.

Consumer group director Claudio Pollack said: “We have reached an important milestone in our work to ensure consumers and small businesses have better protection against unexpected price increases.”

Operator compliance

Three has confirmed contract costs will not go up during its minimum term. “We support Ofcom’s approach to fixing the price for pay monthly contracts for their duration. We think it’s only fair that customers should have clarity around costs when they sign up to a contract.”

Vodafone said customers may be able to leave their contract without penalty if the price rises are “significant”.

“We will respect Ofcom’s guidance on mid-contract price rises. We will continue to notify customers of increases to out-of-bundle call prices a month in advance, with significant variations also potentially allowing a customer to leave their agreement,” it said.

O2 said customers will be able to exit contracts if the price rise is unexpected (i.e. in cases where customers have not agreed to pay more in the second year than the first).

It made clear customers will not be able to exit their contract because of price rises related to inflation.

“Ofcom’s Updated Guidance clarifies that consumers will be free to enter a contract which includes a price change each year in line with a measure of inflation like RPI  – provided the relevant price term is clear and prominent so that the customer clearly agrees to this at the outset. Where this is the case a customer will not be able to end the contract when a price change is applied.  Inflation has an impact on our costs and this clarification will help us to continue to invest in our network and the services that matter to our customers while still offering great value for money,” O2 said.

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