Out-of-contract users paying millions for phones they already own

The UK’s largest mobile network operators (MNOs) are continuing to routinely charge customers for smartphone handsets after the devices have been fully paid off, according to an updated report compiled by Citizens Advice.

In October 2017, the organisation reported that customers of EE, Three and Vodafone who had come to the end of their initial contract period, and had not either upgraded to a new device or switched providers, were being charged an average of £22 and as much as £46 per month for devices they now legally owned. The problem was found to be particularly acute among the over 65s.

Citizens Advice’s latest research has now claimed four million people in the UK have been charged for phones they already own, paying a total of £490m extra to their MNOs. Many of these consumers are still unaware they are still paying for their devices due to what it described as a lack of transparency from MNOs.

Typically, it said, a two-year bundled deal – the most common type of pay-monthly contract – contained no information on the effective cost of the phone, and over half of consumers simply assumed bundled contracts were the cheaper option when this was rarely, if ever, the case.

“It is unacceptable that mobile providers are knowingly overcharging customers for phones they already own,” said Citizens Advice chief executive Gillian Guy.

“We’ve heard a lot of talk from government and the regulator but now we need action. Other companies have already stopped doing this, so we’re looking for these three major providers to follow suit.

“In the meantime, consumers should check their phone bills to see if they can save money with a SIM-only contract or upgrade to a new phone,” she said.

Earlier this year, telecoms regulator Ofcom launched a consultation designed to address the wider problem of consumers being overcharged for communications services at the end of their contract periods.

Besides mobile users, the issue is known to affect millions of broadband and landline users who take out time-limited discounted introductory deals but continue to pay the higher price once the initial period is up.

The regulator is proposing to force communications service providers (CSPs) to notify all consumers and businesses with fewer than 10 employees either by email, snail mail or SMS, between 40 to 70 days before their contract expiry date. However, Citizens Advice said this proposal did not go far enough.

O2, which has split out the cost of airtime and devices since 2013, called on its peers to follow its lead. Chief marketing officer Nina Bibby said: “Charging for phones that have already been paid off does nothing but damage customer trust and the reputation of the industry.

“O2 is the only network out of the big four that gives customers full transparency and control over their monthly bills by splitting the air time and device costs on our custom plans.”

Previously, both EE and Three have told Computer Weekly they already take steps to make the contract end date very clear to users – with EE saying the vast majority of its customers either upgrade or drop to a SIM-only plan, which they are able to do 45 days before the end date.

EE also pointed out that separating the phone and airtime costs didn’t necessarily always mean consumers would get the best possible deal.