EE and
Virgin Media have been fined £13.3m by Ofcom for leaving customers who quit
broadband and phone contracts early "out of pocket".
The
regulator said about 400,000 EE customers who ended their contracts early were
over-billed and paid up to £4.3m too much as a result.
Ofcom said
about 82,000 Virgin customers were overcharged by almost £2.8m. Virgin said it
would appeal.
Margot
James, Digital Minister, said companies need "to play by the rules".
Gaucho
Rasmussen, director of investigations and enforcement at Ofcom, said: "EE
and Virgin Media broke our rules by overcharging people who ended their
contracts early. Those people were left out pocket and the charges amounted to
millions of pounds."
The fine for
Virgin Media was £7m, Ofcom said, with an additional £25,000 for providing
incomplete information to the regulator.
Ofcom found
that Virgin Media had levied early-exit charges that were higher than customers
had agreed to when signing up to their residential contracts. The regulator
said this went on for almost a year.
However,
Virgin Media said it "strongly disagrees" with Ofcom's decision and
would appeal to the Competition Appeal Tribunal.
"This
decision and fine is not justified, proportionate or reasonable. A small
percentage of customers were charged an incorrect amount when they ended one or
more of their services early and for that we are very sorry," said Tom
Mockridge, chief executive of Virgin Media.
Virgin Media
said it had mistakenly overcharged 1.5% of its 5.5 million cable customers
between September 2016 and August 2017.
The company
has reimbursed or made charity donations covering 99.8% of its overcharging.
John Jones,
from Hatfield in Hertfordshire, a Virgin Media customer for seven years,
arranged to terminate his account when he moved house and the firm said it did
not service his new address.
Virgin told
him he would have to pay a "breaking contract charge" of £240.
"That
was in spite of the fact that I had been a customer of theirs for seven years,
wanted to continue using their services, but could not do only because they did
not service my new address," he says.
His attempts
to get Virgin to remove the charge were unsuccessful and he agreed to pay as he
did not want his credit rating to be affected.
The charge
was due to be taken in January last year by direct debit, but Virgin did not
take it until the 16 February. But on 9 February, Virgin Media made a so called
"derogatory report" to credit reference agencies saying John had let
his account fall into arrears.
John says
this had "a devastating effect" on his credit rating.
His rating
with Equifax fell from excellent to fair, whilst his rating with Experian dropped
from excellent to poor.
"It
took me 10 phone calls and emails over a period of 29 days to get Virgin
Media's credit control section to agree to correct their error with the Credit
Reference Agencies.
"Although
they have recovered since, my credit ratings have yet to get back to the levels
they were before this event happened," he says.
EE
apologised to customers after it was fined £6.3m following Ofcom's discovery
that over a six-year period the firm did not set out the charges its mobile
customers would have to pay if they left their contracts early.
Ofcom said
that up to 15 million EE customers faced being over-billed by up to £13.5m as
the company had miscalculated early-exit charges. However, not all affected
customers had paid these excessive charges as EE had subsequently waived some
of them, leaving £4.3m in excessive charges.
A
spokesperson for EE said: "We've already refunded customers and changed
the way we calculate early termination charges, and we will continue to focus
on ensuring our policies are clear and fair for all customers."
However,
Ofcom said that £1.6m of the £4.3m of the overcharged fees had not been repaid
as EE did not have records covering the whole period. Customers who feel they
may have been overcharged should contact EE.
Digital
Minister Margot James said: "We've strengthened Ofcom's powers to better
protect consumers and these fines show the issue is being taken very seriously
and strong action will be taken.
"Companies
need to play by the rules and treat their customers fairly and honestly,"
the minister said.
Gillian Guy,
chief executive of Citizens Advice, said: "Anyone who has been affected by
this deserves a refund.
"This
is another in a long line of failings in the mobile and broadband industry - we
need an independent consumer champion to stick up for customers and stop this
from happening."
Ofcom said
the behaviour of both companies made customers less likely to switch provider,
which was against its rules.
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