Ofcom recently banned rollover telecom contracts which lock consumers into a service contract which renews automatically at the end of the year. It is Ofcom’s contention that this not only forces consumers into long term contracts but it also countermands fair competition.
It is their belief that the customer benefits little from these self-renewing contracts and that once the term has rolled over to a new contract the customer is unfairly charged a high penalty fee to cancel it. As of December this year, these roll-overs will be banned for both broadband and landline internet services and if a customer has already signed this year’s contract, they will need to be transitioned to new deals by December of next year.
At the moment it is estimated that there are approximately 1.5 million consumers affected by rollover deals in the UK from just the largest company alone, BT. However, other companies like TalkTalk use rollover contracts with businesses.
This has led many to question if the same consideration shouldn’t be given to utilities. Consumer advocate groups are calling for Ofgem to regulate utility rollovers in the same way as Ofcom regulated telecom rollover contracts. Recently EDF phased out this type of contract due to customer feedback but British Gas and Scottish Power have yet to end their use of unfair rollover contracts.
The problem isn’t that the contract rolls over but in the fact that consumers are charged a hefty penalty fee if they find another company that supplies cheaper services at or just after the term of their previous contract. Once the contract has been allowed to rollover, the consumer was obligated to pay the cancellation fee. With Ofcom’s latest ruling, telecom customers will now need to renew their contract, change providers or in some cases they may be allowed to purchase services month-to-month.
