This piece first appeared in the money section of the Saga website on 29 January 2014
The text here may not be identical to the published text

 

UPWARDLY MOBILE PRICES

 

Eight million O2 customers with monthly contracts have been told the cost will rise by 2.7% (almost £1 on a £35 a month contract) from March.

 

The notifications were sent by text, email and letter within a few days of new rules from the telecoms regulator Ofcom that were intended to stop mobile companies raising prices during a fixed term contract. The Ofcom ruling didn't ban price increases. It just said that if an unexpected rise happened a customer could leave a fixed term contract without paying a penalty. Normally O2 makes customer who leave pay the monthly fee right to the end of the contract. That can be hundreds of pounds.

 

But there were two loopholes in the Ofcom rules when they came into force on 23 January. First, they did not apply to contracts before that date. Second, they allowed price rises as long as they were clearly explained in the contract at the point of sale - online, phone, or face to face.

 

So O2 leapt through one loophole by putting prices up from March for all existing customers. And it leapt through the other by changing its contracts from 23 January so they warned there would be a rise. In both cases O2 says customers must pay the penalty if they leave the contract early.

 

WHAT TO DO

The cheapest solution is to wait for your O2 contract to end and move to another supplier who doesn't raise prices midterm - in future that policy should be absolutely clear in the contract before you sign it. Virgin Mobile contracts already warn of midterm price rises. Other providers have introduced them in the past. But since the Ofcom ruling Three says it will no longer do it. Vodafone appears to say it won't. EE reserves the right to change prices but there is currently no warning on its website it will raise them mid-contract. So if it did you could leave without penalty.

 

If you are too angry to wait for your contract to expire, put in a formal complaint to O2 at  http://goo.gl/ejsPtb about both the price rise and the penalty for leaving. If the complaint is rejected, threaten to go to the Communications Ombudsman at http://www.ombudsman-services.org/communications.html. O2 may give in at that stage as an Ombudsman case will cost it at least £300. if it doesn't you can take the case to the Ombudsman whose decisions are binding on the firm.

 

The riskiest approach is to cancel the contract, pay the penalty and then pursue a complaint to the ombudsman to try to recover it. One person who tweeted me did that, sold his phone to cover the cost and took out a new contract with another provider.

 

If you lose at the Ombudsman you can always pursue a claim for a refund of the penalty in the courts using the small claims procedure at www.moneyclaim.gov.uk. You will have to pay a fee but if you win you will recover that as well as the disputed amount.

 

WHAT TO SAY

The grounds for a complaint for a pre-23/1/14 contract are

1.    The contract, point of sale material, and the salesperson did not make it clear that a price rise would or could occur during the contract.

2.    Raising prices in line with the Retail Prices Index causes you material detriment (use that phrase) because (a) your own income has not risen by 2.7% and/or (b) in March 2013 the Office for National Statistics said RPI is no longer a national statistic which can be relied upon. The official measure of inflation is the CPI which rose by only 2%.

3.    If your contract is less than 12 months old a rise in line with annual inflation clearly causes material detriment because since you took it out inflation has been lower than the annual figure.

4.    Therefore you are free to leave the contract without penalty under EU law.

 

The grounds for a complaint for a contract made from 23/1/14 are

1.    The contract, point of sale material, website and/or salesperson did not make it abundantly clear as Ofcom says they must that a price rise would occur during the contract.

2.    The warning that prices would rise with the Retail Prices Index (RPI) was vague and uncertain and in March 2013 the Office for National Statistics said RPI is no longer a national statistic which can be relied upon.

3.    Even if a rise in line with inflation was in the contract, raising the price in March, within two months of signing the contract, by an annual rate of inflation is not what you expected and is clearly unfair.

4.    Therefore you are free to leave the contract without penalty.

 

In both cases you could also claim the price rise was unlawful under the Unfair Terms in Consumer Contracts Regulations 1999. They protect people where a company imposes a term which limits the customer's rights but retains similar rights for the company. So it is free to raise prices but the customer cannot leave without paying a large penalty and is thus trapped into paying the higher price. That seems the essence of a one-sided and therefore unfair term.

 

Let me know your experience paul@paullewis.co.uk or tweet me @paullewismoney

 


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