UK subscribers allowed to switch without penalty fees

UK consumers and small businesses will be allowed to exit their mobile, landline and broadband contracts without paying a penalty fee if their service provider increases its prices mid-contract.

Regulator Ofcom has introduced rules to ensure that, starting Thursday, customers entering new contracts will have to be notified of any price increase to what was agreed at the point of sale, at least one month in advance. In such instances, customers will be allowed to leave their provider without having to pay cancellation charges.

Failure by service providers to comply to the legislation could result in a fine of up to ten per cent of its annual turnover, Ofcom said.

The ruling follows a UK review into contract pricing terms. It found that consumers were often unaware that their monthly subscription fees had been increased, since they were under the impression that they were fixed price contracts.

The regulator added that service providers must communicate price changes to their customers “clearly and transparently”.

In order to ensure that the change in policy is implemented by service providers, Ofcom said it will closely monitor complaints and conduct research, such as mystery shopping, to monitor the service provider’s communication of contract terms at the point of sale.

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

“Additionally, our new guide highlights important factors customers might want to consider before entering into a new contract to help them understand exactly what they are signing up to.”

The ruling applies to any new contracts taken out from today onwards, added Ofcom. Customers with existing contracts will continue to be covered  against price hikes under the existing protections, which is Ofcom’s “material detriment test”. If providers consider the increase will be of material detriment to the consumer, then the right to exit without penalty can be triggered.

Last month, UK operator Vodafone raised its prices for customers who go over their monthly allowance, from 35p for calls to all mobiles and UK landlines to 40p, and from 12p per SMS message to 15p. Data usage above customers’ monthly allowance was also increased from £5 for 250MB to £6.

“Like most businesses in the UK our costs are rising and so we need to review our prices now and again,” the firm said at the time.