Ofcom acts to stop rogue mobile phone contracts

Mobile phone companies that allow dodgy sales staff to dupe customers into taking out new contracts now face fines of up to 10% of their turnover after the telecoms regulator announced a crackdown.

Thousands of consumers, contacted by rogue salesman who pretend to be calling from their mobile company, have found themselves moved to new contracts without their knowledge or approval.

Others have been duped into agreeing new deals on the basis that they would receive cashback payments each month, only for these not to materialise subsequently.

Following a long campaign – led in part by Guardian Money – Ofcom has finally introduced long overdue measures to tackle persistent offenders.

The regulator claims that its new rules will prohibit mobile service providers and those selling their products and services, "from engaging in dishonest, misleading or deceptive conduct".

The rules require mobile network operators to:

• Not mis-sell mobile phone services
• Ensure the customer intends, and is authorised, to enter into a contract
• Ensure consumers obtain the information they need at the point of sale
• Ensure the terms and conditions of cashback deals offered by their retailers are not unduly restrictive
• Carry out due diligence checks in respect of their retailers.

A spokesman for the regulator said this week that providers found breaching the new rules could be fined up to 10% of relevant turnover.

Crucially, the rules make the phone companies responsible for the actions of the sales companies they employ to sign up new and existing customers. Previously, the problems faced by consumers were exacerbated by the fact that the mobile phone companies were able to deny responsibility, even though they may have colluded in the mis-selling,

Customers who complained they had been signed up against their will were told it was nothing to do with the phone company, and that they should take up their complaint with the sales company – which in many cases had ceased trading.

Other customers, some of whom had been loyal to the companies for years, found themselves locked into £80-a-month contracts they couldn't afford after the promised cashbacks failed to materialise.

Commission-hungry salesmen were happy to say virtually anything to get a sale, safe in the knowledge they would be long gone by the time their action came to light.

The new rules, which came into force last week, are an admission by Ofcom that its attempts to tackle the problem have so far failed.

In July 2007, following record complaints from consumers, Ofcom introduced a voluntary code of practice. However, instead of resulting in a reduction in the number of complaints, they went up.

At one stage complaints about mobile phones, and in particular cashback deals, were one of the main reasons for calls to Consumer Direct's advice line.

Ofcom said that since March of last year, when it proposed these new rules, complaints about mobile mis-selling have fallen from more than 600 per month to less than 200.

One of the problems is that Ofcom doesn't deal with complaints directly.

Consumers with problems are encouraged by its website to contact Consumer Direct, which can be called on 0845 4040506 or found online at www.consumerdirect.gov.uk.

Source: The Guardian, 26th September 2009

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