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Ofcom Hits Vodafone UK with Record £4.6m Fine for “Failing Customers”

Wednesday, October 26th, 2016 (7:52 am) - Score 918

The telecoms regulator has today hit “failing” UK mobile and broadband provider Vodafone with a “record” fine of £4,625,000 after they were found to have breached a series of consumer complaint handing rules. Ofcom’s investigation of the case uncovered a variety of serious mis-selling, inaccurate billing and poor complaints handling procedures.

Anybody paying attention to Ofcom’s quarterly consumer complaints report will know that Vodafone’s mobile business has been going through a particularly rough period and consistently managed to attract more gripes than any other UK network operator (example).

In keeping with that Ofcom has been busy conducting two investigations into Vodafone, one of which was looking at flaws in their complaints handling procedures (here) and another of which had been examining the operator’s selling and billing practices for their pay-as-you-go services (here). Today was judgement day for both of those.

Lindsey Fussell, Ofcom Consumer Group Director, said:

“Vodafone’s failings were serious and unacceptable, and these fines send a clear warning to all telecoms companies. Phone services are a vital part of people’s lives, and we expect all customers to be treated fairly and in good faith.

We will not hesitate to investigate and fine those who break the rules.”

In short, Vodafone was found to have taken money from PAYG customers without providing a service in return, which was as a result of problems that occurred after they moved customers to a new billing system. Overall some 10,452 PAYG customers lost out when Vodafone failed to credit their accounts after they paid to ‘top-up’ their mobile phone credit. The affected customers collectively lost £150,000 over a 17-month period.

Ofcom said that Vodafone also “failed to act quickly enough to identify or address these problems” and only sprang into life after the regulator intervened, which they say promoted Vodafone to finally “take effective steps to stop pay-as-you-go customers from paying money for nothing, and to reimburse those affected.” The operator also breached Ofcom’s billing rules, because the top-ups that consumers had bought in good faith were not reflected in their credit balances. The result was a fine of £3,700,000.

On the subject of customer complaints handling, Ofcom found that Vodafone’s customer service agents “were not given sufficiently clear guidance on what constituted a complaint, while its processes were insufficient to ensure that all complaints were appropriately escalated or dealt with in a fair, timely manner.”

The operator’s procedures also failed to ensure that customers were told, in writing, of their right to take an unresolved complaint to a third-party Alternative Dispute Resolution (ADR) scheme after eight weeks. The result was a fine of £925,000.

A Spokesperson for Vodafone said:

“We fully appreciate the consequences for our customers of various failures in the migration process over the last three years.

We have sought to remedy these through an additional £30 million investment this year in customer service and training including hiring an additional 1,000 new UK-based call centre personnel and more than 190,000 hours of training to improve how we identify and resolve individual customer problems.

We are also working with the Ombudsman to ensure that customers are able to escalate problems more effectively if we are unable to resolve these within our own systems quickly.

This has been an unhappy episode for all of us at Vodafone: we know we let our customers down. We are determined to put everything right. We are also confident that our customers are already beginning to see the benefits of our substantial investment in new systems designed to meet their needs much more effectively in future.”

The penalties, which must be paid to Ofcom within 20 working days (this must be passed on to HM Treasury), incorporate a 7.5% reduction to reflect Vodafone’s agreement to enter into a formal settlement, which requires them to admit the breaches and reimbursed all customers who faced financial loss (except for 30 people it could not identify). Vodafone will also have to make a donation of £100,000 to charity.

In terms of the fine, on the surface £4.6 million is a hefty figure, although it’s unlikely to give Vodafone too much pain given that they’re a global company and one that works in the tens of billions territory.

However the negative publicity is likely to be a lot more damaging, although Vodafone may well point to a recent investment of £15 million into improving their customer service related training and systems as evidence of their effort to remedy the situation (here).

We’ve pasted a longer summary of Ofcom’s investigation outcome below and you can read Vodafone’s own take on the situation here.

Pay-as-you-go investigation

Ofcom found that Vodafone took money from pay-as-you-go customers but provided nothing in return. This was as a result of problems that occurred when Vodafone moved customers to a new billing system.

Vodafone disconnects inactive pay-as-you-go accounts after a certain period of time and recycles the numbers, a common practice in the industry.

Where a pay-as-you-go phone has not been used or ‘topped-up’ for 270 consecutive days, Vodafone puts the customer’s SIM card into a ‘pre-disconnection state’ for up to 24 hours, before disconnecting it from its network. During this period, customers should not be able to make calls or top-up their accounts.

Vodafone had problems transferring customer accounts to the new billing system, and so stopped disconnecting inactive SIMs from its network. Consequently, they remained in a ‘pre-disconnection state’ for significantly longer than 24 hours. Customers were able to pay for top-ups at cash machines and via other electronic methods during this period, which should not have been possible.

Although receipts confirming the success of their ‘top-ups’ were issued to some of those customers, Vodafone did not credit any of the customers’ accounts, or provide them with the services they had paid for. Nor did the credit show on customers’ account balances. This practice lasted for 17 months, costing 10,452 pay-as-you-go customers in the region of £150,000. Vodafone staff failed properly to investigate and put things right.

Ofcom’s investigation concluded that Vodafone had breached General Condition 23.2(a), which prohibits the mis-selling of mobile telephone services; and General Condition 11.1, which prohibits inaccurate billing.

Complaints handling investigation

All telecoms providers must have procedures in place that follow Ofcom’s approved Code of Practice for complaints handling. The Code sets minimum standards covering the accessibility, transparency, and effectiveness of providers’ complaints handling processes.

Ofcom’s investigation found that Vodafone provided its frontline customer service staff with insufficient and ambiguous information on when to treat a customer’s call as a complaint.

Vodafone’s procedures also failed to ensure that complaints were escalated quickly enough, and that customers received written notification of their right to alternative dispute resolution (ADR) after eight weeks.

We found that Vodafone’s flaws in its complaints handling processes did not comply with our Code of Practice, and so contravened General Condition 14.4.

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By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
Leave a Comment
10 Responses
  1. Patrick Cosgrove says:

    What size fine should this attract?


    1. FibreFred says:

      I knew we would get someone trolling BT into the article, nice work

    2. Evan Crissall says:

      Fair point. BT screwed us over BT Sport. Bullying us into taking out a “free! Free! FREE!” subscription to BT Sport; a service we didn’t even want.

      We don’t watch sport on TV, you see. As I kept telling the BT sales droid. “Oh, but you may as well have it, as it’s free! Free! FREE!”

      We should have guessed what was next.

      Surreptitiously, some months later, that “free” subscription suddenly became charged. Except BT didn’t tell us; at least not coherently.

      BT naturally screwed us for the new subscription charges until we noticed, fefore insisting they cancel it.

      BT pointedly refused to refund a penny for what was originally given away as Free.

      At a guess that was the basis of BT’s scam :-

      Lure in millions of punters with the offer of a “free” BT Sport TV service. Then clandestinely introduce a charge for it. And rely on customer ignorance and inertia to gouge the punters for millions of pounds. With only a fraction ever bothering to cancel. A sharp practice. Very sharp.

      And Ofcom? What did it do about it? To rein in this flagrant mis-selling of the incumbent £50bn telco beast? Anything or nothing? Whadda ya reckon?

      There are several articles in the Daily Mail / MoneySavingExpert about it. Hundreds of thousands, maybe millions of us were scammed.

      Once fooled, twice shy. Lesson learned: BT is a very slippery fish. Check every BT bill for unexpected and unauthorised charges. The Beast has form.

      And don’t rely on Ofcom to halt it. Ofcom and BT are thick as thieves; like cellmates Fletcher and Grouty in HMP Slade.

    3. FibreFred says:

      Sounds like someone didn’t read the terms and conditions

  2. Webbs says:

    How much revenue did Vodafone generate in the time it took to write this article? Probably more than that fine one suspects…

  3. brianv says:

    Ofcom needs to butt out. Shouldn’t be their remit to financially punish telcos for (allegedly) poor customer service.

    It is the market that should decide; with customers given honest and fair ratings of telcos and ISPs, to make those decisions.

    1. Mark Jackson says:

      Customers already do that, but it doesn’t stop abuse and that’s partly why you have a regulator. I also don’t believe there’s anything “alleged” about the problems that Ofcom have examined in today’s outcome, it seems to stem from a detailed investigation and a lot of customer complaints.

  4. dragoneast says:

    Is the problem that fines are effectively paid for by the customers, who lose out twice? How do chargebacks work in this situation? Would an effective deterrent be that if a customer reports that the supplier has failed to supply a PAYG product, the card issuer, retailer, or other payment processor (e.g utility provider if added to a bill), for the payment has to refund the payment on demand and has the right to recover the repayment from the supplier, and the customer and supplier are then left to fight it out. Presumably it should be statutorily enshrined rather than relying on contract, where the supplier often dictates the terms, unless the other party is a multi-national banking giant, of course. (Which is why credit cards can be so useful). So the customer has the money, not the supplier. A chargeback dispute though must not affect the customer’s credit rating whilst it remains unresolved. To ensure, for instance, if a customer makes a false claim the deterrent is that Voda, or whoever, can blacklist the customer, but not everyone else.

    With PAYG the supplier holds all the cards. It’s more pay-before-you-go (if we please). The playing field needs to be evened up.

    The problem is that justice is so delayed and cumbersome. It should be quick and easy. Billing systems work wonderfully well, but when they go wrong they seem to go disastrously wrong, and are difficult and time-consuming to remedy. Like most software. We are all in the hands of the software developers, who like the Church and car manufacturers, seem so often to have a timescale linked to eternity when there is no money in it for them.

  5. Evan Crissall says:

    Ofcom shouldn’t be “fining” any telco. It’s an extra-judicial and ultra-vires punishment, that should be challenged in the courts. Which is where this issue should have been aired in the first place – the small claims court.

    The sums and numbers involved are petty. Just ten thousand affected out of 19.2 million Vodafone UK customers.

    And the so-called Ofcom “fine” is extortionate. Totally disproportionate to the scale of the billing error by Vodafone.

    The error itself was also trivial. PAYG top-ups, in rare circumstances (suspended SIMs) not immediately credited to customer’s account. Average dispute per PAYG customer just £14. 99.97% of customers received full refunds. Vodafone made generous donation to charity (£100,000) in lieu of last 30 customers who couldn’t be found to refund.

    Yet the urchins at Ofcom impose a £4.6 million “fine” for a £150,000 billing error? Seriously? That’s nothing short of malicious and vindictive.

    Ofcom has discredited itself even further. What a nasty, mean-spirited action by this hopeless regulator. Could there be another motive at Ofcom for creating a mountain out of a molehill? Deliberately damaging Vodafone’s reputation for some other, ulterior motive?

    Yet massive and ongoing consumer issue exist elsewhere in the industry, and still Ofcom does nothing.

    e.g. there are millions of “No Shows” per year, by BT Openreach engineers. Which costs us tens if not hundreds of millions in lost earnings. While we all wait in pointlessly for the Openreach linesman who never arrives.

    Yet perversely, Ofcom allows BT to levy a crippling £160 “fine” on anyone who’s not at home when the linesmen drops by. Hardly a level regulatory playing field, is it?

    Ofcom, just the plaything of BT Group.


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