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Home > Media and Analysts > Media and Analysts FAQs > Telecoms FAQs > Frequently Asked Questions
Mobile Mis-selling - FAQ
Questions
Mis-selling
The main points of the consultation
Q2. What has Ofcom been reviewing?
Q3. What are Ofcom’s initial conclusions?
Q5. Are there other options being considered?
The proposed new rules
Q7 What obligation does the mobile service provider have under Ofcom’s new proposals?
Q8 How can I dispute the contract that has been mis-sold to me under Ofcom’s new proposals?
Q10 Is the mobile mis-selling code of practice going to become regulatory?
Q12 Will the new rules mean that consumers will always get their cashback?
Q13 How will the new rules stop cash back operators going bust in the future?
Other options considered
Q15 Why does Ofcom not regulate mobile phone dealerships?
Q16 Why haven’t you banned cash back?
Current cashback problems
Q17 I have not been able to claim my cashback, what can I do?
Q18 Why can I not take a dispute with a mobile dealership to one of the ADR schemes?
Q19 My re-seller has gone out of business, how can I recover my cashback?
Q20 Can mobile providers chase administrators on behalf of consumers for cash back offers?
Mis-selling
Q1. What is mis-selling?
Mis-selling covers a range of sales and marketing activities including:
- the omission of relevant or the provision of false and/or misleading information (for example about tariffs, savings or promising offers which do not materialise);
- applying unacceptable pressure to change providers, such as using intimidating behaviour or refusing to leave until the customer signs a new contract; and
- slamming, an extreme form of mis-selling, where customers find themselves with a service from a new company without their knowledge and consent. Forms of slamming can include, passing off (i.e. where representatives claim to represent a different company), customers being told they are merely signing up for information rather than entering into a new contract, or the forging of customers’ signatures on contracts without the customer being aware.
The main points of the consultation
Q2. What has Ofcom been reviewing?
Complaints to Ofcom about mobile mis-selling have risen sharply since 2006. Ofcom worked with 3, O2, Orange, T-Mobile and Vodafone to develop and introduce an industry code of practice in July 2007 aimed at tackling misleading sales and marketing practices including the fairness of the terms of cashback deals being offered.
Ofcom made clear that unless the code resulted in a significant and rapid reduction in consumer complaints we would consider the case for formal regulatory intervention. By October 2007 there had been no significant change in the level of complaints to Ofcom and we began this review to consider the case for further action.
Q3. What are Ofcom’s initial conclusions?
The evidence we have collected indicates the introduction of the code has brought about some positive changes in practices by mobile service providers and retailers. Mobile service providers have reviewed their sales and marketing procedures, and those of the independent retailers, including the terms of cashback offers.
However, these have not been uniformly applied and have not brought about an adequate reduction in consumer complaints or consumer harm. Complaints to Ofcom have continued at broadly the same high level as at the introduction of the code. The number of complaints in both January and February 2008 exceeded those in July 2007.
In light of the continuing levels of complaints, the varying levels of monitoring and enforcement of the code by the mobile service providers and the extent of consumer harm involved, we consider that reliance on the ‘voluntary’ code does not provide adequate protection for consumers.
Q4. What is Ofcom proposing?
We are therefore proposing to introduce a new General Condition (GC) on sales and marketing practices that will apply to all mobile service providers. Amongst other things, it requires mobile service providers:
- not to engage in dishonest, misleading or deceptive conduct and to ensure that those selling their products and services do not mis-sell;
- to make sure the customer is authorised to, and intends to, enter into a contract;
- to make sure customers get the information they need when they buy the product;
- to ensure that the terms and conditions of all sales incentives – including cashbacks - offered by their retailers are not unduly restrictive; and
- to carry out due diligence and a number of checks in respect of their retailers to ensure the soundness of the company and its directors.
With a GC, Ofcom can formally investigate whether the rules are being followed and ultimately impose sanctions for breaches of the regulations. We will also be able to make sure that the rules are being applied consistently by all mobile service providers.
Q5. Are there other options being considered?
Yes – the consultation sets out a number of options.
We have considered whether the industry voluntary code is sufficient. For the reasons set out above we believe it does not provide adequate protection for consumers.
We have also considered specific options to ban or restrict cashbacks, including making retailers pay them upfront or automatically without the need for consumers having to send in copies of bills. We believe these options would risk restricting consumer choice by affecting not just problematic cashback offers but also those (the majority) that work well . Our research shows around 80% of cashback customers are happy with their deals. We also are concerned that these options would be costly and time-consuming to introduce and that could lead mobile service providers to reduce the use of independent retailers.
.Q6. What are the next steps?
Ofcom is seeking views on the options and on our proposals by 29 April.
There are a number of ways to respond. You can complete the online form on http://www.ofcom.org.uk/consult/condocs/mobmisselling/howtorespond/form, email us at mobile.misselling@ofcom.org.uk or write to Anne Hoitink , Consumer Policy, Ofcom, Riverside House, 2A Southwark Bridge Road, London SE1 9HA .
We will consider all responses and plan to publish a statement with our conclusions by July 2008.
The proposed new rules
Q7 What obligation does the mobile service provider have under Ofcom’s new proposals?
The mobile service provider will be bound by the provisions of the General Condition. including:
- not to engage in mis-selling;
- to monitor the behaviour of parties through which its service is sold;
- to carry out due diligence in respect of parties selling its service;
- to ensure information is provided to the customer about its service and any sales incentives that may be sold with its service;
- to ensure that terms and conditions of sales incentives offered by parties selling its service are reasonable;
- to retain records regarding the sale of its service; and
- to ensure that parties selling its services are sufficiently trained .
Q8 How can I dispute the contract that has been mis-sold to me under Ofcom’s new proposals?
If the contract is sold directly through the retail arm of a mobile service provider, the customer should contact the mobile service provider. If the customer and the mobile service provider cannot resolve the problem, the customer can escalate their complaint to the Alternative Dispute Resolution (ADR) scheme the mobile service provider is part of (Otelo http://www.otelo.org.uk/ or CISAS http://www.cisas.org.uk/ ).
If the contract is sold through an independent retailer, the customer should first contact the retailer in question. If the customer and the retailer cannot resolve the dispute, the customer should contact their mobile service provider and ask the mobile service provider to look into the dispute. If no solution can be found, the customer can contact Ofcom. Ofcom, would, based on complaints information, decide to investigate a mobile service provider’s compliance with the General Condition.
Q9 Who can I escalate the issue to if I cannot resolve it with an independent retailer or mobile service provider directly? Will they be able to take the issue on board on my behalf?
Under the new rules if a customer cannot resolve with the independent retailer, the customer should contact its mobile service provider. If the mobile service provider cannot find a solution with its independent retailer, the customer can contact Ofcom. Ofcom can, based on complaints information, decide to investigate a mobile service provider’s compliance with the General Condition.
Q10 Is the mobile mis-selling code of practice going to become regulatory?
We are taking the main provisions of the code of practice and making them into requirements on the mobile service providers. There are some additional requirements – for example around providing information at point of sale, record retention and due diligence test.
Q11 How will the new rules apply, if the conditions of the cash back offer have been changed and I wasn’t informed of this?
The mobile service providers should ensure that they, or those who sell their services, inform you of the terms and conditions of the contract that applies. If this has not happened, you should contact the retailer in the first instance. If you are not satisfied by the response you should contact the mobile service provider. Then if the situation is not resolved, you should contact Ofcom. Ofcom can, based on complaints information, decide to investigate a mobile service provider’s compliance with the General Condition.
Q12 Will the new rules mean that consumers will always get their cashback?
The new rules aim to make sure cashback deals are fair, so customers can claim their cashbacks easily.
In the case of customers not being able to claim their cashback because a retailer has gone out of business, customers affected will need to contact the retailer’s administrator in the first instance. They may also wish to contact the mobile service provider, who may be able to help customers in difficulty, depending on the circumstances of the case.
Q13 How will the new rules stop cash back operators going bust in the future?
Retailers go out of business for many reasons. Our proposals aim to prevent retailers adopting business models based on cashback deals where few customers make successful claims. We understand that these have created financial problems for retailers in the past when more customers successfully claimed cashback than expected.
Q14 If I do not receive my cash back, where can I get my money from? Will I be able to claim it back from my network operator under the new rules?
The rules that we are proposing are intended to make sure that cashbacks offered from now on will be fair. If customers follow the terms of the cashback and still have difficulties claiming the cashback, they should in the first instance pursue it with the retailer; if this is not resolved satisfactorily they should contact the mobile service provider who should be monitoring the retailer. Then if the situation is not resolved, you should contact Ofcom. Ofcom, can, based on complaints information, decide to investigate a mobile service provider’s compliance with the General Condition
Other options considered
Q15 Why does Ofcom not regulate mobile phone dealerships?
Under the Communications Act 2003, Ofcom can only regulate public electronic communications providers. Retailers are not public electronic communications providers.
Q16 Why haven’t you banned cash back?
We think cashbacks are a legitimate form of offer . They enable retailers to compete with mobile networks and result in lower prices for consumers. Our research shows that around 80% of cashback customers are happy with the deals and have been able to claim their money. Our proposals aim to tackle bad cashback deals while allowing consumers to continue to benefit from cashbacks supplied on fair terms.
Current cashback problems
Q17 I have not been able to claim my cashback, what can I do?
For cashback customers who have not been able to claim their money on old deals, you should discuss their situation with the retailer who should be following the code of practice that is in place.
If that does not resolve the problem, you should contact the mobile network provider who should be monitoring the retailer's activities.
Q18 Why can I not take a dispute with a mobile dealership to one of the ADR schemes?
The ADR schemes apply to public electronic communications providers . Retailers are not public electronic communications providers.
Q19 My re-seller has gone out of business, how can I recover my cashback?
Where cashback offers can't be met because the retailer has gone out of business, the customer should contact the administrator to find out the situation and the mobile networks who, depending on their situation, may provide some refunds or let them change the terms of, or exit, their mobile network contract.
Q20 Can mobile providers chase administrators on behalf of consumers for cash back offers?
Customers should contact the administrators with their individual claims. The mobile service provider may be able to provide contact and other details.
Q21 If I don't receive the cashback money agreed, I cannot afford the contract. Do I have the right to cancel without charge? Do I have to pay the monthly bill?
If you have a contract with a mobile service provider you will still be bound by that. Depending on the circumstances, the mobile service provider may offer some refunds or let you exit or change the terms of their mobile network contract.
Q22 Can I take up an individual dispute registered with the network operator under a voluntary code of practice to the ADR if they fail to reach a resolution?
If the mobile service is sold through the mobile service provider’s own outlets, and the customer and the mobile service cannot find a solution, the customer can register with the ADR.
Where a customer cannot resolve a dispute with an independent retailer, they should contact the mobile network provider who should be monitoring the retailer's activities.
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