Consumers allowed to switch mobile provider mid-contract
Telecoms regulator Ofcom is to allow mobile phone customers to exit their contracts at any time without penalty - if their provider increases the cost of their monthly deal.
The new rules, which come into effect three months from today, also apply to consumers and small businesses locked into landline and broadband contracts.
However, the new rules will not apply to people on existing contracts - only those taking out contracts after their introduction will benefit.
Ofcom said it is now likely to regard any mid-contract increase in monthly charges as "materially detrimental" to consumers. As a result, providers should give consumers at least 30 days' notice of any such price rise and allow them to exit their contract without penalty.
The new rules also state that any change to contract terms, pricing or otherwise, must be communicated "clearly and transparently" to consumers.
Crucially, Ofcom has said that any provider who chooses to make reductions in the call, text or data allowance, in order to avoid increasing prices outright, will also be obliged to allow customers to exit their contracts.
Fairer deal for consumers
Claudio Pollack, Ofcom's consumer group director, said: "Ofcom is today making clear that consumers entering into fixed-term telecoms contracts must get a fairer deal. We think the sector rules were operating unfairly in the provider's favour, with consumers having little choice but to accept price increases or pay to exit their contract.
"We're making it clear that any increase to the monthly subscription price should trigger a consumer's right to leave their contract – without penalty."
In early January, Ofcom launched a consultation after stating that mid-contract price rises could potentially "harm" consumers.
Mobile phone network providers did not seem to pay any attention to the consultation – in April 2013, around 5.5 million Orange and T-Mobile customers on pay monthly deals were hit with a price increase, as a result of "rising business costs” according to parent company Everything Everywhere.
At the time EE dismissed criticism, saying: "The terms and conditions state that prices can be increased mid-contract, by the same [rate] as the Retail Prices Index. Customers are encouraged to read the terms and conditions and have a 14-day period in which to change their minds. If customers are unhappy they can break their contract if they pay a fee for leaving us early."
Under the new Ofcom rules, EE would not have been allowed to charge customers to exit their contracts.
Consumer groups welcomed the decision. Which? executive director Richard Lloyd said: "Today's announcement from Ofcom is an overwhelming victory for the 59,000 people who joined our campaign calling for fixed to mean fixed on mobile phone contracts.
"Consumers told us price hikes on fixed contracts were unfair, and now people will be able to leave these contracts and switch to a cheaper provider without being hit by extortionate exit fees."
Dominic Baliszewski, telecoms expert at Broadbandchoices.co.uk, added: "Ofcom's announcement is a long overdue victory for broadband, mobile and landline customers. Moving the financial goal posts is unfair on consumers. After all, if you bought a plane ticket to New York, you wouldn't expect to be charged an additional amount halfway over the Atlantic."