Virgin Media and EE have been fined more than £13m by Ofcom for overcharging customers who cancelled their phone and broadband contracts early.
Virgin Media immediately said it would appeal against the telecoms regulator’s “unreasonable, unjustified and disproportionate” £7m fine. EE, which was responsible for overcharging nearly 80% of the almost 500,000 customers affected across both companies, received a smaller fine of £6.3m. This was because Ofcom decided to reduce its initial £9m fine by 30% to “reflect that EE admitted the breaches and agreed to settle the case”.
Ofcom said both companies broke consumer protection rules by failing to make clear to customers the charges they would have to pay if they ended their contract early, and by levying “excessive” fees to leave.
The watchdog’s investigation into early exit charges at the groups found about 400,000 EE customers who ended their contracts early were billed excessively, resulting in them overpaying £4.3m in total.
Almost 82,000 Virgin Media customers were overcharged a total of just under £2.8m, an average of £34 per customer. However, 6,800 of those Virgin Media customers were overcharged by more than £100. Virgin Media was also fined an additional £25,000 for “providing incomplete information” to Ofcom.
Ofcom’s director of investigations and enforcement, Gaucho Rasmussen, said: “Those people were left out of pocket and the charges amounted to millions of pounds. That is unacceptable. These fines send a clear message to all phone and broadband firms that they must play by the rules, in the interests of their customers.”
Tom Mockridge, the chief executive of Virgin Media, said Ofcom’s ruling was “unjustified and disproportionate” and that the company was lodging an appeal with the competition appeal tribunal.
“We profoundly disagree with Ofcom’s ruling,” Mockridge said. “This decision and fine is not justified, proportionate or reasonable. This unreasonable decision and excessive fine does not reflect the swift actions we took, the strong evidence we have presented, or our consistent, open and transparent cooperation with the regulator. We will be appealing Ofcom’s decision.”
Virgin Media said the customers affected, those who terminated their contracts between September 2016 and August 2017, had already been refunded, with interest. For those customers it was unable to locate it had made donations to charity.
Over a six-year period, EE overcharged 400,000 customers a total of £13.5m. However, not all affected customers ended up paying the excessive charges as they were subsequently waived by EE. The firm estimated that the actual overpay figure came to £4.3m but it had only been able to find affected customers accounting for £2.7m of the amount they were overbilled.
“We accept Ofcom’s findings and recognise that we have made a mistake,” a spokesman for EE said. “We apologise to customers with discounted tariffs who paid more than they should have when cancelling their contracts early. 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.’’
Phone and broadband companies can charge customers who decide to leave their contracts early but under Ofcom rules those charges must be made clear to customers and must not make switching to another provider too costly.
Virgin has agreed to lower its early exit fees by between 30% and 50% and will not make customers who move house but stay with Virgin sign a new contract.