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Phone providers drop listed termination charges but dispute Ofcom's legal opinion


The UK's three major phone providers have agreed to slash fees charged when customers end contracts early after telecoms regulator Ofcom said high charges broke consumer protection law.

BT, Talk Talk and Virgin have agreed to reduce sums by up to 85% from their listed charges, though Ofcom said that these listed charges were rarely levied in full. Ofcom said that it expected other ISP and landline phone companies to do the same.

One Virgin cancellation charge will fall from £29.99 to £4.63 per month, while a Talk Talk package's cancellation cost will fall from £33.48 to £8 per month. 

In practice the fall in charges is not as significant, though. "Prior to its 1 June changes, TalkTalk’s practice was to cap total early termination charges at £70," said Ofcom in a footnote to its announcement. "Virgin Media does not enforce the cable charge shown and its current approach in practice is to discount the charges to £10/month for each cable service shown."

Ofcom said that it believed high charges were a violation of consumer protection law the Unfair Terms in Consumer Contracts Regulations.

"Ofcom’s interpretation of the Regulations is that consumers who end contracts early should never have to pay more than the payments left under the contract – in fact they should often pay less, to reflect the costs providers save because the contract ends early," it said in a statement.

The regulator announced that this was its view in December 2008 and began monitoring charges. It said that the companies had agreed to change their charges without agreeing with Ofcom's assessment of the law.

"BT, TalkTalk and Virgin Media do not believe their early termination charges were unfair," said the Ofcom statement. "But, after constructive discussions, they have agreed to significantly reduce those charges for landline (or landline plus broadband) services."

The regulator said that it would take legal action against other phone companies that did not similarly cut termination charges.

"Ofcom expects other landline providers to apply similar principles and to reduce their early termination charges to similar levels," it said. "If they don’t, they could face formal enforcement action."

The Unfair Terms in Consumer Contracts Regulations impose strict controls on the fairness of contracts for consumers because typically they are not negotiated contracts but agreements which consumers must accept or reject wholesale.

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