Ofcom to crack down on overcharging for handsets

Ofcom wants transparency on what customers are paying for. File Photo

Ofcom is set to crack down on mobile phone operators who continue to charge customers monthly fees long after their handsets have been paid off.

A mobile phone bill is broken down into call costs and line rental, and often a separate amount towards paying for the handset itself.

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But the regulator said yesterday it was “concerned” that as many as 1.5 million people are still being charged for their handset through a process known as “bundling” – when the cost of a handset is merged with the cost of using the phone, leaving people who should have paid off the cost of their handsets continuing to be charged a fee.

Ofcom warned that providers are “not transparent” about the respective costs of the handset and the airtime, so customers cannot tell how much they are paying for the different parts of their deal.

The watchdog said it would consult on proposals to fix the problem, with options ranging from requiring mobile phone firms to break down the cost of the different parts of the mobile package a customer is purchasing, or forcing providers to automatically to introduce fairer tariffs at the end of the minimum contract period.

Under the second option, mobile firms would move customers to a “default” deal when their minimum contract period ends, so they stop paying for their handset, and instead pay only for airtime.

Lindsey Fussell, Ofcom consumer group director, said: “Mobile customers should get the best possible deal. We’re concerned that people are not told, or cannot tell, exactly what they are paying for.

“So we are extending our work on behalf of mobile customers to ensure that handset charges are clear and fair – not just when they enter a contract, but also when their minimum period is up.”

However, consumer groups warned that moves to regulate the practice could push up the price of phone bills.

Ernest Doku, mobiles expert at uSwitch.com, said: “Ofcom’s calls for greater transparency from mobile providers is welcome. As the watchdog points out, millions of customers are currently paying more than they need to on their phone contracts, as they’ve already paid off the cost of the handset but are still forking out the same amount each month.

“There are various different deals available to consumers in the market, so making things more transparent across all tariff types is vital to make it easier to compare handset costs and what really is the best way to get a phone and airtime package.”

He added: “There’s also a concern that some providers will use this push for greater transparency, in splitting out the cost of the handset and airtime, to advocate the new breed of ‘flexi’ tariffs. Whilst these do separate out the cost of phone contracts, the benefits can come at a significant premium to customers.”

Ofcom has asked consumer groups, the public, industry and other interested parties to comment on the proposals by 7 November. It will then examine responses and evidence before publishing detailed proposals to take forward early next year.