Ofcom Hits O2 UK with £10.5m Fine for Overcharging Customers

Mobile operator O2 (Telefonica UK) has this morning been hit with a fine of £10.5 million after the telecoms regulator, Ofcom, found that more than 140,000 of their customers had been “overcharged” – due to billing errors – when leaving the operator between 2011 and 2019.

At present broadband ISPs and mobile operators are all required to have systems and processes in place which are fit for purpose, deliver accurate bills and ensure that consumers are not overcharged for services. This also requires providers to obtain approval of their metering and billing systems from third-party assessors, known as Approval Bodies.

Back in July 2019 Ofcom revealed that an Approval Body working for O2 had notified the regulator of a Category 1 Extraordinary Performance Failure (EPF) at the operator (here). The notice suggested that “from at least 1 January 2012 – 7 March 2019, O2 took duplicate final direct debit payments from customers who terminated their contracts on a Saturday or Sunday and had an outstanding periodic bill to pay.”

The regulator immediately opened an investigation and has now found that – between at least 26th May 2011 and 15th March 2019 – O2 did indeed contravene their rules (GC 3.2 and former rule GC 11.1). The operator did this by “failing to render or make available accurate final bills to customers after their cancellation of services” (i.e. termination bills) and by “overcharging a significant number of customers terminating their ‘Pay Monthly’ services.”

In total, over 250,000 customers were billed for these incorrect charges, amounting to £40.7m, but only around 140,000 customers actually paid the extra charges (paying a total of £2.4m).

Summary of those affected by the billing error:

— c.140,000 customers paid c.£2,410,000 in overcharges;

— c.26,500 customers were overcharged c.£2,320,000 but did not pay those charges largely due to their own (in)action rather than the actions of O2; and

— c.85,200 customers were overcharged c.£35,930,000 but had been disconnected by O2 for non-payment of bills and did not pay those charges.

O2 had initially identified issues with its billing processes in 2011, but Ofcom said that its “efforts to address these problems were not successful and customers continued to be overcharged.” O2 has accepted the findings of the investigation.

Gaucho Rasmussen, Ofcom’s Enforcement Director, said:

“Mobile customers trust their provider to bill them correctly and fix any errors as quickly as possible. But these billing issues continued for a number of years without sufficient action from O2, and thousands of customers were overcharged as a result. This a serious breach of our rules and this fine is a reminder that we will step in if we see companies failing to protect their customers.

O2 has refunded the customers who were affected, and we are satisfied the company has taken action to prevent this happening again.”

As above, O2 has refunded the customers affected in full for the extra charges they paid, plus an additional 4%. For those customers that O2 has not been able to reach, the company has committed to make a donation to charity for the equivalent amount of money those customers were overcharged. It has also changed its billing processes to prevent this issue arising again.

An O2 spokesperson said:

“As the operator proactively driving over £168m value back to our customers in the last year alone, we are disappointed by this technical error and sincerely apologise to customers impacted.

As Ofcom have stated today, the vast majority of funds reported were not overpaid. Only 6% – £2.4m – relates to money that was overpaid by customers.

We identified the issue ourselves and notified our industry billing auditor. We have also taken proactive steps to refund all impacted customers for the extra charges they paid, plus an additional 4%.”

Any customers who feel they may have been affected, but which have not yet been refunded, are encouraged to contact the operator with evidence. Ofcom’s fine includes a 30% reduction from the £15m financial penalty they would have imposed, which reflects that O2 has accepted the findings of their investigation and agreed to settle the case.