Mobile networks could be fined 10% of turnover for mis-selling

Telecoms and media regulator Ofcom is trying to deal with problems faced by consumers when mobile phone services cost more than they were told they would or they have difficulties cashing in rebates or they are signed up to new contracts without being properly informed of the implications of it.

When consumer complaints reached 600 a month it attempted to solve the problem with a 2007 code of practice for industry. Though complaints have now reduced to 200 a month Ofcom said that the code was not a powerful enough measure.

From today it will have the power to fine providers up to 10% of their turnover, it said, and to make them responsible for the sales tactics of the retail chains that sell their services.

The new rules state that providers must not mis-sell mobile phone services; make sure the customer intends and is authorised to enter into a contract; make sure consumers get the information they need at the point of sale; make sure that the terms and conditions of cash back deals offered by their retailers are not unduly restrictive; and carry out certain due diligence checks in respect of their retailers," said an Ofcom statement.

"Providers who breach the rules could be fined up to 10% of relevant turnover," it said.

Ofcom said that examples of mis-selling that it had come across included someone whose mobile phone contract cost twice what he was told it would and whose debt ended up in the hands of a debt collection agency.

Another customer found that their 16-year-old daughter had been presented with a new contract which upgraded and extended the original. The customer, who paid the daughter's bill, could not make the network reject the contract.

When it announced its intention to implement the new rules earlier this year, Ofcom said that they would give it power to take direct action.

"Ofcom can formally investigate whether the rules are being followed and ultimately impose sanctions for breaches of these rules. We will also be able to make sure that the rules are being applied consistently by all mobile service providers," it said.

It said then that the new rules were necessary as other measures had failed. "We have concluded that reliance on the ‘voluntary’ code does not provide adequate protection for consumers," it said. "Whilst the introduction of the code has brought about some positive changes in practices by mobile service providers and retailers … complaints to Ofcom relating to general mis-selling have not decreased significantly from the levels just before the Code was introduced."