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‘Bundled’ mobile phone users stung with £400 in extra costs

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28/08/2020
A third of mobile phone users are being ripped off to the tune of £400 a year as they continue to pay for a handset that’s already been paid off during the contract period.

Many mobile customers pay for both their handset and airtime bundled together in a single contract.

But one in three ‘bundled’ customers are still being charged the full price of their contract even after paying off the cost of their handset, leading to a £182m mobile phone overpayment rip-off, according to campaign group, Which?

In February this year, a number of mobile phone giants committed to reduce the cost for out-of-contract customers so they’re not charged for the handset beyond the initial term.

But Which? said the providers have taken “different approaches” in applying the commitments and claims Three customers are the worst affected as it decided not to apply any discounts at the end of the contract.

It found around four in 10 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 had 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 two in five EE customers, they 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.

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% discount applied by the firm.

Out-of-contract bundled customers on O2, Tesco Mobile and Virgin Mobile are less likely to face such big overpayments, as these providers told customers they would see their bills reduced to the equivalent 30-day, or best available, airtime deal.

When asked why customers had stayed with their provider beyond the minimum term, a quarter said they had not got around to changing contract or switching providers, 20% said they were happy or didn’t want to change their phone, 18% thought they were getting a good deal and another one in five said they trust their provider.

‘Treat customers fairly’

Which? is now calling for the regulator to review whether mobile providers are truly treating their customers fairly when it comes to mobile contracts.

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.”

What do the mobile providers say?

An EE spokesperson, said: “It is entirely wrong to suggest we aren’t fulfilling our commitment to Ofcom’s fairness measures. Before the mandatory introduction of end-of-contract notifications in February 2020 we already led the industry by contacting mobile customers a number of times before their contract ended, as well as afterwards, clearly informing them of their options.”

A Three spokesperson, said: “Applying an arbitrary discount to tariffs will not effectively tackle what really matters – helping customers to find a contract which is both best-suited to their needs and priced fairly is what we do.

“We allow our customers to choose what they do when they reach the end of their fixed term commitment. To ensure they can make an informed choice, we send all customers a notification before the end of their contract which shows them what they are paying for now, what an equivalent SIM only tariff is and also a SIM only tariff based on their actual usage.”

Vodafone declined to comment.

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