Mobile and broadband companies including O2 and EE ‘used the 2014 loophole to raise contract prices’
Mobile and broadband companies including O2 and EE ‘used a 2014 loophole to raise contract prices’ to nearly double the rate of inflation as millions of Britons face a squeeze Cost of life
- Mobile and broadband providers have used loopholes in the rules to drive up bills
- Customers can leave the contract without penalty if they suffer “material damage”
- The phrase was widely understood to refer to any kind of price increase
- An apparent oversight means it was never properly defined in the revised rules
Mobile and broadband companies have been accused of using a loophole to raise prices by nearly double the rate of inflation.
An investigation by The Mail on Sunday found suppliers used a loophole in the rules to raise bills.
The measures that came into force in 2014 were intended to allow customers to terminate a contract without penalty if they suffer what has been described as “material damage”.
The phrase was widely understood to refer to any sort of price increase, but an apparent oversight meant it was never properly defined in the revised rules.
Documents uncovered by the MoS show that several suppliers have argued in submissions to industry regulator Ofcom that ‘material harm’ should not apply if customers were told when signing a contract that the price could increase. Unless they get that concession, they insisted, they would have to charge a higher up-front fee.
An investigation by The Mail on Sunday found suppliers used a loophole in the rules to raise bills
It was hoped the flaw would be used infrequently and some companies, including Vodafone, have pledged not to use it at all. However, the floodgates opened when O2 and EE began raising prices for contract customers.
An analysis of this journal and cost of living champion We.co shows that almost all major mobile and broadband providers have introduced increases of 3.9% above the rate of inflation.
O2 and Virgin Mobile add 3.9% to the higher retail price index (RPI), while EE, Vodafone and BT Mobile along with broadband providers BT, Plusnet and TalkTalk put it at the top of the list. lower consumer price index (CPI) measure.
Increases generally occur in April and are based on inflation rates in January or February of each year. It is estimated that more than 20 million households are trapped by exit fees and price hikes above inflation as a result.
The current RPI rate is 9.8% and the CPI is 6.2%. The practice means, for example, that with O2 increasing its charges this year by 11.7%, a £35-a-month call, text and data plan will increase by almost £50 a year. To escape the additional cost, a customer would have to pay off the remainder of their contract.
IDS: Cut taxes now or risk a 10-year crisis
By Anna Mikhailova, Mail on Sunday Deputy Political Editor
The cost of living crisis will last a decade if the government does not cut taxes now, a former Tory leader has warned.
Sir Iain Duncan Smith has warned that delaying tax cuts would plunge the UK into a recession from which it would take ten years to recover.
Sir Iain is one of several senior Tory MPs urging Boris Johnson and Rishi Sunak to do more to boost growth.
The MP for Chingford and Woodford Green told the Mail on Sunday that raising interest rates without boosting growth and cutting taxes will plunge Britain into a recession ‘which we will struggle to emerge from for a decade’ .
Sir Iain said: ‘If we get it wrong and end up in a recession and high inflation, it’s going to destroy a lot of businesses. We can’t afford it. We have to keep growing, and the only way to do that is to cut taxes.
Mr Sunak pursued an unpopular National Insurance tax hike just as households felt the full effect of rising inflation and energy bills.
Treasury sources said further tax and spending measures to ease the cost-of-living crisis are unlikely before the fall.
Sir Iain said last night: ‘The government needs to do it now, not wait until November.
Retired teachers June and Richard Nunn, both 70, canceled their fixed contracts with Sky TV when prices rose.
‘What good is a contract when the supplier can change it without you signing anything new?’ said Mrs Nunn, from Wandsworth, south-west London.
Greg Marsh, Managing Director of We.cosaid: “This loophole is a bit like the police saying it’s legal to rob someone’s house if you tell them.”
A Virgin Media O2 spokesperson said: “This price increase will fuel further investment in our network and services.” Vodafone said: “We have clearly set our prices at point of sale, in line with the latest Ofcom guidelines.”
BT Mobile, EE, BT and Plusnet, which are all part of the BT Group, and TalkTalk said they followed Ofcom’s rules.
A spokesperson for Sky, which also owns NOW, said: “We aim to keep prices as low as possible while delivering content customers love.”
An Ofcom spokesman said: ‘We are strengthening our rules so that from next month customers get a simple example of how monthly prices will rise over the course of the contract before signing up.’