Which? is calling for an end to the £182 million mobile phone overpayments rip-off, as it reveals one in three ‘bundled’ customers are still being charged the full price of their contract even after paying off the cost of their handset – leaving some potentially overpaying by more than £400 a year.
Last year, Ofcom secured voluntary commitments from most of the big players who offer bundled deals to reduce prices for out-of-contract customers, to reflect that they should no longer be paying a charge for their handset. These came into effect in February 2020.
However, providers have taken different approaches to how these commitments are applied and the consumer champion found that around a third (36%) of customers whose contracts have ended in the last two months are still overpaying on their bill.
The worst affected were customers of Three, which decided not to apply any discount to bundled customers when their contracts end.
Around four in 10 (43%) Three customers whose contracts had ended in the last six months claimed they saw no price drop at the end of the term – meaning they were in effect continuing to pay for a handset that has already been paid off.
Based on current contract costs, that could leave a Three customer with a Samsung S20 5G phone paying £37 a month – or £444 a year – more than the provider’s equivalent airtime deal for their bundle.
For EE customers it was two in five (40%) that saw no drop in price, and for Vodafone, it was three in 10 (31%). Discounts applied by EE and Vodafone only come into effect three months after customers have gone out-of-contract, which means that some of these customers may not have yet seen a change in their monthly costs.
In both cases, this approach could leave customers unnecessarily paying the full price of their contract for three months after it ends. Even when the discounts are applied, they are unlikely to be sufficient to offset the overpayments.
A Vodafone customer with an iPhone 11 could still be left paying £32 a month – or £384 a year – more than they need to for an equivalent airtime deal after the provider’s £5 per month discount is applied. Meanwhile, an EE customer with a Samsung S20 5G phone could still be overpaying by £26.20 a month – equivalent to £314 a year – even with the 10 per cent discount applied by the firm.
Out-of-contract bundled customers on O2, Tesco Mobile and Virgin Mobile are less likely to face such hefty overpayments, as these providers told customers they would see their bills reduced to the equivalent 30-day, or best available, airtime deal.
Alongside the commitments to reduce the overpayments trap, in February this year Ofcom also gave all providers 10-40 days to start sending end-of-contract notifications for customers reaching the end of their minimum term.
These messages help ensure customers know their contract is coming to an end and inform them of options available to them. Those with bundled mobile contracts should also be told about at least one SIM-only deal. Providers told Which? that they have sent end-of-contract notifications to all customers as they are required to, but that some notifications may have been missed.
When Which? asked why customers had stayed with their provider beyond the minimum term, a quarter (26%) of people stated they had not got around to changing contract or switching providers, a fifth (20%) said that they were happy or didn’t want to change their phone, one in five (18%) thought they were getting a good deal and another one in five (18%) said they trust their provider.
While Which? welcomes the commitments made by some providers, which have improved the situation of many out-of-contract bundled customers who are overpaying, it believes that EE and Vodafone should have gone further to ensure that customers are not overpaying when their bundled contract comes to an end.
In the case of Three, Which? believes the lack of discount for affected customers is insufficient and is not aligned with being a signatory to Ofcom’s voluntary Fairness for Customers commitments. This means that those customers will continue to overpay, potentially by significant sums.
Which? is now calling for the regulator to review whether mobile providers are truly treating their customers fairly when it comes to mobile contracts which currently could still leave many people out of pocket.
Natalie Hitchins, Head of Home Products and Services at Which?, said:
“While some mobile firms have taken action to end overpayments, our research suggests that others could do a lot more to ensure that customers are not being exposed to rip-off charges.
“Ofcom should ensure that all providers are treating their customers fairly and have taken enough steps to stop people overpaying. In the meantime, it is really important that customers don’t wait. If you think you might be out of contract or overpaying, check your phone bills to see if you can save money with a SIM-only deal or with an upgrade to a new phone.”
