UPD Citizens Advice Slam UK Debt Collection for Broadband Cancel Fees

The UK Citizens Advice agency has criticized the “arbitrary cancellation fees” that some UK consumers face when attempting to switch broadband ISPs, with the average cost of such charges apparently coming out at £190 with peak fees of up to £625 being reported. Poor broadband speeds, connection faults and bad support are some of the key reasons why people switch.

Generally over half of the problems reported to the Citizens Advice agency were for “substandard service” and apparently people who needed to move house ended up being more likely to suffer because “they wouldn’t be able use the service after they moved“. The latter comment seems unusual because most ISPs are setup to cater for house moves and thus there should be no loss of service or additional fees.

However the case may be different if the home owner chooses not to use the same ISP (i.e. not to keep and move their existing service) or where an existing product (e.g. Virgin Media’s cable service) isn’t available at the new location and this forces a change of ISP, which means you’d become subject to the contract’s cancellation policy (if still within the contract term itself).

The agency reach its conclusions after analysing 3,317 Internet and broadband reported to the Citizens Advice Bureaux in England and Wales during July 2013 to June 2014. In addition, the Citizens Advice consumer service helped with 4,551 ISP related issues across England, Scotland and Wales over the same period (note: only the 3.3k figure is used to make up the statistics directly below).

The Top 3 Reported Issues

1. 23% were about cancellation and withdrawal.
2. 18% of problems are to do with complaints & redress.
3. 15% of problems concern costs, billing or payment.

As a result of all this the agency wants ISPs to stop issuing cancellation fees in situations where “customers have been having persistent problems with their service, so that people aren’t being forced to stay in unsatisfactory contracts“. At the very least they’d like ISPs to be “a lot more careful handing cancellation fees over to debt collectors” (this is a historic problem with the industry and over the years we’ve seen plenty of debt collection mistakes).

Gillian Guy, CEO of Citizens Advice, said:

“People are finding themselves held captive by bad broadband services. Some consumers who have stood up to problem suppliers have found themselves being punished for switching when they’ve been hit with a cancellation fee that is then passed over to a debt collection agency.

Internet service providers must not shackle customers seeking a better service with unreasonable fees that can turn into shock debt. All internet users need to be able to easily have a way out of inadequate contracts and broadband speeds that only give them daily frustration.”

Sadly the agency doesn’t name and shame any ISPs, although it’s important to put their report into context and thankfully they have at least given a constructive list of some of the complaints they’ve had to deal with. The complaints seem to mirror many of the gripes that we’ve seen over the years and supports the call for ISPs to stop punishing customers who suffer problems with their service. Indeed some of the examples listed below would be well served by a visit to the local small claims court.

Example Broadband Problems Reported to Citizens Advice

• One woman was hit by a cancellation fee even though it wasn’t in the terms and conditions of her contract. She had tried to switch provider after the broadband speed was so bad that she was paying repeatedly to use an internet café.

• One broadband user in his 70s saw his service stop working altogether after months of problems. When he changed provider he was sent a letter saying that he owed over £200 for early cancellation, which was then handed over to a debt collection agency.

• One client from Southampton kept being sent bills for months after he had transferred to a new provider. The first company denied his contract with them had ever been cancelled and they had instead put him on a rolling contract.

• One client moved home and was not told she would be put on a new contract at after she moved, instead of just having her old contract moved over. The supplier insisted she was tied into a new 18 month contract when she called to say she didn’t want to continue with them. She soon found herself owing over £170 that she worried debt collection penalties could be added to.

• One man from Lancashire was offered faster fibre optic broadband by his internet provider but was later reverted back to his old service when the installation gave him big problems. He decided to switch to another provider to get faster internet but was then harassed by his original provider over an early cancellation charge.

No doubt ISPs would counter that the reason long contracts and cancellation fees even exist is to help bring the cost of consumer broadband provision down, which is one reason why you’ll almost always pay more for a single monthly contract than a 12-18 month term; the latter being popular among all of the largest national ISPs like BT, Virgin Media, Sky Broadband, TalkTalk and EE.

Accepting a long contract is thus a choice and will always carry some inherent risk, although the option to pay more with a smaller and more reputable ISP does exists for those who would rather not take the risk. At the same time this is no excuse for ISPs behaving poorly, although many problems are usually the fault of BTOpenreach’s underlying network than the ISP itself (except on independent networks like Virgin Media, Hyperoptic, Gigaclear etc.).

Elsewhere there are plenty of rules and schemes to help protect consumers, such as the small claims court, and all ISPs are required to be members of an Alternative Dispute Resolution (ADR) complaints handler, which can fight on your behalf (ISPs also have their own problems with those). Equally if the problem is related to broadband speed then, so long as you’re within the first 3 months of a new contract and on an ISP covered by Ofcoms Speed Code, there is usually the possibility of being able to exit penalty free.

Back in 2010 Ofcom also introduced rules for early termination charges (here), which have since been revised slightly but are still very relevant and it’s important to be mindful of them.

UPDATE 5:17pm

The UK Internet Service Providers Association has released the following statement.

An ISPA Spokesperson said:

“The cancellation policies on contracts across several sectors generally require the remaining subscriptions to be paid off and reflect actual costs, such as a charge from a wholesale provider and we urge consumers to read the terms and conditions and shop around before committing to a contract. Without knowing the specifics of each case we can’t comment on the examples, our own data shows a substantial reduction in complaints over time, as users and average speeds grow and ISPs improve their complaint handling procedures. The regulator Ofcom is actively looking at switching and have issued new ways in which a customer can exit a contract without penalty.”