Protecting consumers from unfair small print charges

Ofcom today published guidance for communications providers on how it thinks the law applies to the extra charges consumers may have to pay on top of their usual bill.

This guidance (together with Ofcom’s enforcement activity) will give consumers appropriate protection alongside the benefits of competition.

Protecting consumers

Video briefing

Ofcom wants to help protect consumers from unfair charges that are often hidden in the small print.

These additional charges are generally for paying by cash or cheque (rather than by direct debit), receiving an itemised or paper bill, paying late (or not at all); or leaving a provider before a contract has ended.

Ofcom has also published a consumer guide, offering advice to consumers on the type of charges to look for before signing up with a new communications provider.

Legal obligations on providers

Ofcom’s guidance sets out what it thinks communications providers have to do to meet their obligations under the Unfair Terms in Consumer Contract Regulations 1999.

In particular, these companies need to:

be clear and up front with their customers and do more to make it easy for consumers to understand the charges; and
make sure that extra charges that are not part of the price for the services the consumer is buying are fair.

Enforcement

Telecoms and pay-TV companies now have until the beginning of April to make any necessary changes to their terms and conditions. After that, Ofcom will consider the best way to make sure they comply with the law.

What the guidance covers

When communications suppliers advertise prices, they may set out certain extra charges - like non-direct debit charges - in a prominent and transparent way such that the consumer recognises that they are part of the price for the services they are buying.

Where these extra charges are prominent and transparent enough, normal competition – and not regulation – can be the principal mechanism through which consumer interests are met.

But, if a provider does not make these charges prominent and transparent enough, and they are separate, additional charges, the charges should reflect direct costs only. And some extra charges, like late payment charges, should always reflect only the supplier’s direct costs. Others, such as charges for ending contracts early, should also be limited to fair levels.

For example:

Non-direct debit charges should be clear and limited to the cost of dealing with the payment (where these aren’t part of the price for the services being bought);
Charges for itemised billing should not usually be more than £1.50 per bill;
Charges for late payments should reflect only direct costs like the identifiable extra cost of collecting the money; and
Consumers who end contracts early should never have to pay more than the payments left under the contract - in fact they should often pay less, to reflect the costs providers save because the contract ends early.
The guidance also gives Ofcom’s view about fixed-term contracts that renew automatically. Ofcom believes that they are likely to be unfair if they do not give consumers something of benefit in return for the renewal and a fair chance to opt-out.

Protection for low income households

During its review of these charges, Ofcom was concerned that some low income consumers may be excluded from access to essential fixed-line telephone services.

The Regulations do not give special protection to these consumers. Instead, Ofcom has worked with BT to develop and launch a low cost home phone service to those on low incomes and pensioners who receive some government benefits. 'BT Basic' does not include an extra charge for consumers who do not pay by Direct Debit and is also available to consumers who have pre-pay mobile phones and/or broadband services. In Hull, Kingston Communications has removed the non-Direct Debit charge from its social telephony products.

Ofcom Chief Executive, Ed Richards said: “When consumers shop around for the best deal, they should be able to easily assess the true cost of what’s on offer. We want to make sure that telecoms and pay-TV companies are up front about all their charges and, where there are small print charges, they must be fair.”

Ends.

NOTES FOR EDITORS

1. See Related Items for our advice for consumers on additional charges.

Protecting consumers from unfair small print charges