Mobile phone users are being ripped off by up to £38 per month because providers continue to charge them for a phone they already own once their contract ends, says Citizens Advice.
The charity is calling for mobile providers to stop overcharging customers by taking payments for handsets once their contract is up.
Currently, most providers do not tell customers when their contract ends, which means many end up paying more than for phone services than they need to.
Research from the charity shows that four million mobile phone customers are being charged for phones they already own.
It says that on average customers are overcharged £22 a month, but this could be as high as £38 for high-end phones such as an iPhone 7 or Samsung Galaxy.
Customers are often unaware they are being charged for handsets after their contracts have ended, as their provider has not told them they have paid off the phone and only need to continue paying for calls, texts and data.
Gillian Guy, chief executive of Citizens Advice, says: “It is unacceptable that mobile providers are knowingly overcharging customers for phones they already own.”
The telecoms regulator Ofcom is currently consulting on plans to end the practice, and is due to publish plans in March 2019.
Ofcom is proposing that communications providers send a notification to their customers when they approach the end of their contract.
However, Citizens Advice says this doesn’t go far enough to help consumers.
Citizens Advice wants these companies to make the pricing of mobile services and phones more transparent by separating out the cost of mobile service and the phone.
Ms Guy comments: “We’ve heard a lot of talk from government and the regulator but now we need action. Other companies have already stopped doing this so we’re looking for these three major providers to follow suit.”
She adds: “In the meantime, consumers should check their phone bills to see if they can save money with a SIM-only contract or upgrade to a new phone.”
Bundled contract rip off
Bundled deals, where the cost of the handset and network service is priced as one, are the most common type of mobile contract and typically last two years. The charity says these deals often come without any information on the effective cost of the phone.
According to the charity, bundled mobile contracts are confusing consumers, with most (55%) assuming it is the cheaper option.
Citizens Advice found that in over 700 different bundled contracts, consumers pay more in almost three out of four of cases than buying a phone outright.
The charity says vulnerable people are more at risk of being overcharged. Older people are twice as likely to be charged for a phone they already own longer than 12 months, which could cost them on average £264.
Splitting the cost of phone and service could cost consumers more
Price comparison and switching service uSwitch says Citizens Advice is being “short-sighted” as splitting the cost of the phone and the service, typically called ‘flexi-tariffs’, could leave consumers at risk of paying more.
Flexi-tariffs separate the cost of the airtime and the handset by running different contracts for both, so once the device is paid off customers automatically just pay for the cost of the minutes, texts and data.
After comparing the cost of a SIM-only deals, uSwitch found that this could be costing consumers up to £69 extra a year for airtime alone.
Ernest Doku, mobiles expert at uSwitch, says: “Citizens Advice is right to call for more transparency in how much mobile users pay for their contracts, but championing tariffs that split the cost of the phone and the service still risks seeing consumers paying considerably more than they should for their airtime.
“The intention behind these deals to prevent consumers from paying twice for the same handset is commendable, but they are certainly not the best value deals available, even within the same network. Switching to a SIM-only deal can still offer significant savings over paying for the airtime part of a package, especially given how much data costs drop from year to year.
“Ofcom’s proposals to introduce notifications telling consumers that their deals are coming to an end is a far more practical and speedy way to address some of these problems.”