EE and Virgin Media fined for overcharging customers

16 November 2018

Ofcom has today fined EE and Virgin Media a combined total of £13.3m for overcharging phone and broadband customers who wanted to leave their contracts early.

The fines follow investigations into EE’s and Virgin Media’s early-exit charges.

Phone and broadband companies can charge customers who decide not to stay with them for the minimum term of their contracts. But under Ofcom rules, these charges must be made clear to customers, and must not make it too costly to switch to another provider.

Our investigation found that both EE and Virgin Media failed to comply with these rules, because:

  • around 400,000 EE customers who ended their contracts early were over-billed, and customers ended up over-paying up to £4.3m;
  • almost 82,000 Virgin Media customers were overcharged a total of just under £2.8m; and
  • both companies failed to clearly set out the charges customers would have to pay if they ended their contract early.

Gaucho Rasmussen, Ofcom’s Director of Investigations and Enforcement, said: “EE and Virgin Media broke our rules by overcharging people who ended their contracts early. Those people were left out of pocket, and the charges amounted to millions of pounds .

“That is unacceptable. These fines send a clear message to all phone and broadband firms that they must play by the rules, in the interests of their customers.”

The money raised from these fines will be passed on to HM Treasury.

What happened with EE

Over a six-year period, EE’s ‘discount contracts’ did not clearly set out the charges its mobile customers would have to pay if they ended their contracts early . We also found that up to 15 million discount contracts for EE’s mobile, landline and broadband customers required them to pay excessive early exit charges.

Of those customers, 400,000 decided to leave their contracts early. They were over-billed by a total of up to £13.5m in early exit charges.

This was because EE miscalculated early-exit charges for these customers based on the non-discounted monthly retail price. Affected customers were therefore allowed to pay a lower price while they remained EE customers, but were treated as if they were paying another, higher price if they wanted to leave.

Not all affected customers paid the  excessive charges, as some were waived by EE. Taking this into account, EE estimates that its discount customers overpaid by up to £4.3m. These excessive charges made it less likely that EE customers would switch to another provider, which is against Ofcom rules.

EE fine and customer refunds

Ofcom has fined EE £6,300,000 for its failings . This includes a 30% reduction because EE admitted the breaches and agreed to settle the case .

As part of EE’s co-operation with our investigation, EE agreed to change its terms and significantly reduce its charges. EE has refunded just over £2.7m to the affected customers it has been able to identify, although this means up to £1.6m cannot be refunded. Ofcom took these facts into account when setting the financial penalty.

As a result of our investigation, EE is also reviewing its processes and systems to make sure it complies with our rules in future.

What happened with Virgin Media

For almost a year, Virgin Media charged early-exit fees that were higher than customers had agreed to when they signed up to their residential contracts.

The company overcharged almost 82,000 customers who left their contracts early, by a total of just under £2.8m – an average of £34 per person. Of these, 6,800 customers were overcharged by more than £100.

Because Virgin Media set its early-exit charges too high, its customers were less likely to switch to another provider, which is against Ofcom’s rules.

We also discovered that Virgin Media failed to publish clear and up-to-date information on its website to help customers understand early-exit charges.

Virgin Media fine and customer refunds

Ofcom has fined Virgin Media £7,000,000. We have also fined the company an additional £25,000 for failing to provide full information when we asked.

Virgin Media has refunded or made donations to charity in the cases of 99.8% of customers who were affected, and is working to trace the remaining customers in order to refund them. If it is unable to trace these customers, it will donate the remaining refunds to charity.

As a result of our investigation, Virgin Media has significantly reduced the level of its early-exit charges by an average of 30%, and up to 50% in some cases.  Virgin Media now applies an additional reduction to the early-exit charges paid by customers who end their contract after moving house.

The company has also made changes to its procedures and contract terms for home movers.

As a result of our investigation, Virgin Media has also made changes to its procedures and contract terms which apply to customers who move house. The company has agreed to:

  • make it clearer in contract terms, on its website and in conversations with customers, that Virgin Media’s network does not cover the whole of the UK; and if a customer moves home to an area outside of its network, they may be liable to pay an early-exit charge;
  • promote 30-day rolling contracts as an alternative option for customers who are aware they may need to move house in the near future; and
  • update its training processes and customer service agents’ scripts and materials to ensure that customers who indicate they may need to move home are provided with correct information.

In addition, customers who move house within Virgin Media’s network, and still use its services, will no longer have to sign up to a new minimum-term contract to avoid paying early-exit charges. Instead, they can now continue their existing contract at their new address.