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Last Updated: Tuesday, 18 March 2008, 16:52 GMT
Q&A: Mobile mis-selling
Mobile phone
Ofcom wants the new rules to come in by the summer

Telecoms regulator Ofcom has vowed to crackdown on mis-selling of mobile phone contracts, saying that a voluntary code of practice has failed.

Thousands of customers have complained about mobile phone cashback deals and inaccurate information when signing up for a contract.

So what can they now expect to happen?

It seems everyone has a mobile phone. What are these customers complaining about?

There are an astonishing 66 million or so mobile phone accounts active in the UK, making it one of the more competitive mobile phone markets in the world.

Customers often switch contracts in search of the best offers.

As a result a huge industry of retailers and third-party sales agents has developed, trying to offer the most competitive deals.

Some customers complained that they were given inaccurate information by some retailers desperate for their business. Others were unhappy after receiving unsolicited calls from certain third-parties touting deals.

These deals included cashback offers, when customers buy a handset up front and then are refunded the cash over the course of the contract.

But restrictive terms and conditions, which were often difficult to understand, meant some failed to get receive their cashback. Other retailers have gone bust, leaving customers without their money.

How big a problem is it?


Government advice line Consumer Direct figures show that mobile phone contracts are the second biggest consumer gripe, behind secondhand cars.

Man with mobile phone
Mobile phone operators say they have strict guidelines

Advisors took 34,679 complaints on the subject last year, a whopping 49% rise on the previous year, making it the fastest growing problem.

Meanwhile the telecoms regulator Ofcom said that between July 2007 and January, it received an average of 700 complaint calls a month.

Of course, not all of these complaints are necessarily justified.

But consumer group Which? suggested consumers should not touch certain cashback offers with a bargepole.

It spoke to one customer who lost 600 when a dealer went out of business, and another who had to send 30 emails before receiving 223 cashback.

So what's been done to stop it?

Ofcom has already read the riot act to the industry, demanding it cleans up its act when it was receiving 500 complaints a month about mobile phones.

It brokered a deal with the big five mobile phone providers - O2, T-Mobile, Orange, Vodafone, and 3 - who signed up to a voluntary code of practice for marketing and selling mobile phone contracts in July 2007.

The regulator warned that if it did not see an improvement it would bring in mandatory new rules.

But complaints to Ofcom have risen by 50% since then.

So that didn't work then?

It seems not, although the big five say that they have stopped using a number of dealers and have very strict internal rules which mean they trade responsibly.

A woman holding a mobile phone
Mobile phone contracts are one of the biggest consumer gripes

They point the finger at more unscrupulous operators in the industry.

Interestingly, Ofcom's new crackdown will stipulate that operators ensure that any dealer selling their products does not engage in dishonest, misleading or deceptive conduct, and that providers conduct checks on any retailers selling their products.

What else will the proposed new rules ensure?

They say that customers cannot be tricked or deceived into switching to a new contract when they did not intends to do so.

Also, it requires that customers are given all the information they need when they sign up, and that terms and conditions of any cashback deals are fair.

Under the proposals, if any business breaches this general condition, they face a fine of up to 10% of their turnover.

When will the new rules take effect?

Ofcom is consulting on the plans until 29 April and hopes the new rules will be in place by the summer.

Crackdown on mobile mis-selling
18 Mar 08 |  Business
The great phone swindle
25 Oct 07 |  Business
What can your mobile do for you?
11 Feb 08 |  Technology
Ofcom set to ban 'unfair' charges
28 Feb 08 |  Business
Mobile phone cashback 'rip-off'
20 Dec 07 |  Business
Phone customers 'should cancel'
10 Sep 07 |  West Midlands

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