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Ofcoms Proposals to Curb Additional Broadband Charges
By: MarkJ - 28 February, 2008 (1:33 PM)

Ofcom has today proposed new measures to ensure that "extra charges" are fair and that landline, broadband, mobile and pay-TV providers clearly market the true cost of their services. Consumers have long complained about unexpected charges, which often crop up as part of complicated contract terms.

Some providers are known to make a range of additional charges, for example, when consumers choose to pay by cash or cheque rather than by Direct Debit; cancel a contract before the minimum period has finished; or make a late payment.

The regulators draft guidance stresses the need for providers to be clear and up front with their customers, doing more to make it easy for users to understand the charges. The key proposals are as follows:

Charges for paying bills by cash or cheque rather than by Direct Debit
  • When providers advertise prices, they must make clear what any extra charges for paying by cash or cheque will be.

  • If a provider does not make the extra charges prominent and transparent enough that consumers see them as part of the main price under the contract, then the charges must reflect direct costs only. They should only include the provider’s extra costs of collecting normal payments and not an opportunity to collect further revenue.

  • However, where the extra charges are prominent and transparent enough, normal competition – and not regulation – will provide price discipline on behalf of consumers. Customers will then have all the information that they need to know which provider to choose.
Charges for late payments and failed payments
  • Providers should make consumers much more aware of these charges.

  • A charge should only be made after consumers have had a fair chance to pay their bills.

  • The charges should reflect only the direct costs providers incur, like the true extra cost of collecting the money.
Minimum contract periods and charges for canceling contracts
  • Providers must make the length of contracts clear, as well as the costs involved if a consumer chooses to break a deal.

  • Subsequent contract periods should not be imposed unless there is a clear benefit to the consumer and cost to the provider.

  • A consumer who ends a contract early should never have to pay more than the payments left under the contract period - in fact they should often pay less than this, to reflect costs providers save because the contract ends early and their ability to recoup sums by selling services to other consumers.

The consultation is published here:
http://www.ofcom.org.uk/consult/condocs/addcharges

The closing date for responses is 8 May 2008. Ofcom expects to publish the final guidance in autumn 2008.


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