Ofcom has said that consumers and small businesses should be able to exit their fixed term landline, broadband or mobile phone contract without penalty if their provider increases their monthly costs.
The regulator is telling providers how to interpret the rules and what it expects from them regarding consumers' cancellation rights after price increases.
This follows on from a consultation on how consumers should be dealt with fairly after a provider has increased costs during a fixed term contract.
The Ofcom guidance on the rules that come into force three months from today and apply to new landline, broadband and mobile contracts (including some 'bundled' products) is that:
▪ Ofcom is likely to regard any increase to the recurring monthly subscription charge in a fixed-term contract as ‘materially detrimental’ to consumers;
▪ providers should therefore give consumers at least 30 days’ notice of any such price rise and allow them to exit their contract without penalty; and
▪ any changes to contract terms, pricing or otherwise, must be communicated clearly and transparently to 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.”
Which? has welcomed this with their executive director, Richard Lloyd, saying:
"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."