Ofcom consults on separating cost of mobile contracts and handsets

The regulator said it had found that many customers on bundled handset and airtime contracts continue to pay the same price after the end of their minimum contract period. In many cases this means customers continue to pay for the handset, even though they have paid it off.

Customers are often unaware they are being charged for handsets after their contracts have ended, even though they own the phone and only need to continue paying for calls, texts and data.

Last week, consumer charity Citizens Advice called for mobile providers to stop charging people for phones they already own. According to the charity, there are an estimated four million people in the UK have been overcharged, paying a total of £490m extra.

Among the options under consideration by Ofcom are mandating further transparency measures and/or fairer default tariffs, which the regulator said are not mutually exclusive.

Under the first option, providers would inform customers when they purchase services, and in a clear and transparent manner, of the different cost elements of the mobile package a consumer is purchasing, particularly where this includes handset, airtime and any other services. That information would also be provided again at the end of the minimum contract period to provide the customer with a breakdown of what they are continuing to pay for.

In the second option, providers would place customers on a different, and fairer, default deal when their minimum contract period ends. Rather than continuing to pay for their handset, customers would instead only pay for their airtime.

Ofcom is seeking responses by November 7.

Gillian Guy, chief executive of Citizens Advice, said it is “heartening that Ofcom has now acted to help fix the problem”.

“While greater transparency around pricing would be a step in the right direction, what people really want is not to be charged for products they already own.

“Companies should automatically stop charging people for handsets once they’ve paid them off. Of Ofcom’s proposed solutions, this is the only one that would make sure people aren’t unfairly overcharged.”