12 December 2023 , 08:24
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Mobile, broadband and TV companies could soon be banned from hitting customers with “confusing” mid-contract price rises.
Most major telecom firms implement price rises that are linked to inflation - but following an investigation, regulator Ofcom has said this does not provide “sufficient certainty” for customers about how much their bills could rise by. Millions of households have been hit by huge bill increases this year due to high inflation - with some having paid hikes of up to 17.3%.
Ofcom is now proposing that mid-contract price rises must be outlined "in pounds and pence" so customers can better understand future bills. The move comes following a review by the regulator in February. A final outcome will be published in the spring, then if the proposals are given the green light, the new rules will come into force four months after the publication of its results.
Ofcom found four in ten (11 million) broadband customers and over half of mobile customers (36 million) were on contracts subject to inflation-linked price rises. Under current rules, telecom companies are allowed to increase prices mid-contract in line with inflation, plus up to 3.9% extra on top of this. The rate of Consumer Prices Index (CPI) inflation or Retail Price Index (RPI) are normally used to decide these price rises.
However, more than half (55%) of broadband customers and pay monthly mobile customers (58%) do not know what inflation rates such as CPI and RPI measure. Very few broadband (16%) and mobile customers (12%) were both aware of the price rise and able to identify that it was linked to inflation. Ofcom said it received more than 800 complaints related to contract price increases between January and October this year.
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Ofcom chief executive Dame Melanie Dawes said: “At a time when household finances are under serious strain, customers need prices to be crystal clear. But most people are left confused by the sheer complexity and unpredictability of inflation-linked price rise terms written into their contract, which undermines customers’ ability to shop around.
“Our tougher protections would ban this practice once and for all, giving customers the clarity and certainty they need to secure the best deal for their needs and budget.”
Rocio Concha, Which? Director of Policy and Advocacy, said: "Ofcom proposing to ban unfair and unpredictable mid-contract price rises is a huge win for consumers. Which? has spearheaded the campaign to protect millions of households from being blindsided by these huge price hikes by telecoms firms.
"It's positive that the regulator plans to move quickly to consult and implement these proposals. With Ofcom calling time on these unfair price hikes, providers must stop this practice immediately."