Ofcom warns companies they must comply or face the courts

Ofcom is to clamp down on communications providers that add unfair additional charges to their customers' bills.

The telecommunications regulator has published new guidance that spells out its view of the Unfair Terms in Consumer Contract regulations 1999. It has given providers three months to meet them. If they fail to do so it warned it will pursue them through the courts if need be.

The proposals are designed to ensure that any extra charges levied by landline, broadband, mobile and pay-TV providers are fair, and the true cost of their services made clear to customers.

Steve Weller, communications expert at independent price comparison and switching service Uswitch.com, said: “We welcome Ofcom’s announcement that it will investigate the additional charges placed onto customers’ bills by their providers.

“Regardless of whether bills are paid on time, BT charges £18 a year for customers paying by cash, cheque or card instead of direct debit and Virgin Media charges a staggering £60 a year per customer. In total, 3.4 million phone customers are being stung like this, to the tune of £75m a year. "

Increasing competition has driven down headline prices and offered consumers more choice. However falling headline prices are not the whole picture and Ofcom wants to ensure customers have all the information that they need so they can work out which provider to choose.

Consumers may also pay additional charges as part of complicated contract terms. Some providers 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.

Ofcom has started a consultation phase on the proposed new guidance, which has two main principles.

Providers need to be clear and up front with their customers and do more to make it easy for consumers to understand the charges. They must also ensure charges that are not part of the price of a main service under the contract are demonstrably fair.

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

Ofcom chief executive Ed Richards said: “Consumers benefit from greater competition and lower prices. But for consumers to get an all-round fair deal they need to know the full costs of the services they buy.

"Our proposals will encourage companies to be open and straightforward about additional charges where they feel it is necessary to include them. In addition, our proposals mean that in some cases, additional charges will be subject to clear limits. This would provide direct protection for consumers”