Mobile phone cashback deals could be banned as research suggests that many deals continue to rip-off consumers.
Ofcom, which regulates the telecoms industry, says cashback deals account for about 50% of its mobile mis-selling complaints. Despite the industry introducing a voluntary code of conduct last summer, the regulator says complaints have not reduced significantly and it has therefore now launched a review that could see cashback deals outlawed altogether.
Cashback deals often are used by retailers to entice customers to sign up for contracts. The networks, such as Orange or 3, pay commission to retailers, some of which is given back to consumers.
However, complicated cashback terms & conditions such as rigid timetables mean many consumers never see their money.
Research by Which? says the voluntary code of conduct has not worked.
The code states that retailers should give customers at least 60 days to post back bills and claim their cashback. However, Which? found that of 10 websites offering cashback deals, six did not comply with the code.
It names one site e2save.com, part of the Carphone Warehouse, which is says only gives customers 30 days to post back claims.
Malcolm Coles, editor of Which.co.uk, says: “Mobile phone cashback deals that make customers jump through hoops to get their money should be banned.
“If cashback is offered it should be automatic.”
A spokesman for Carphone Warehouse admits e2save.com doesn't follow the voluntary code but says it does work within "existing codes of practice stipulated by Ofcom.
He adds: "We welcome Ofcom’s announcement of a formal review into sales practices and cashback promotions and will be working with it in setting future industry guidelines.
"The interest of our customers is always an absolute priority for us."
A spokeswoman for Ofcom admits that a total ban on cashback offers could be on the cards if it is unable to work with networks and retailers to find an alternative solution.
She adds: “We have not seen a significant reduction in the number of complaints and therefore we will launch a review to assess the complaints, and explore other options to reduce these.
“One of the issues is that we don’t regulate the retailers so we need to work out how to make a chain of accountability that works properly.
“Yes we could ban cashback deals – but the solution must be proportionate to the problem and a total ban might not be.”
Have you had trouble getting your cashback from a mobile phone deal? Should these deals be banned altogether?
Tell us your views in our forum.