Mobile phone and broadband companies, including O2 and EE, ‘used the 2014 loophole to increase contract prices’

Mobile phone and broadband companies, including O2 and EE, ‘used a 2014 loophole to raise contract prices’ to nearly double the rate of inflation as millions of Britons face falling cost of living.

  • Mobile phone and broadband providers have used the loophole in the rules to increase bills
  • Clients can leave the contract without penalty if they suffer ‘material harm’
  • The phrase was widely understood to refer to any type of price increase.
  • An apparent oversight meant that it was never properly defined in the revised rules

Mobile phone and broadband companies have been accused of using a loophole to raise prices at almost double the rate of inflation.

An investigation by The Mail on Sunday found that providers have used a loophole in the rules to increase bills.

The measures that came into force in 2014 were intended to allow customers to terminate a contract without penalty if they suffer what was described as “material harm”.

The phrase was widely understood to refer to any kind of price gouging, but an apparent oversight meant that it was never properly defined in the revised rules.

Documents uncovered by the MoS show that several providers argued in filings with industry regulator Ofcom that “material harm” should not apply if customers were told when they signed a contract that the price might rise. Unless given this concession, they insisted, they would have to impose higher initial charges.

An investigation by The Mail on Sunday found that providers have used a loophole in the rules to increase bills.

The loophole was expected to be rarely used, and some companies, including Vodafone, have pledged not to use it at all. However, the floodgates were opened when O2 and EE began raising prices for contract customers.

An analysis of this newspaper and cost of living champion nous.co shows that almost all major mobile phone and broadband providers have introduced increases of 3.9% above the rate of inflation.

O2 and Virgin Mobile add 3.9 per cent to the highest Retail Price Index (RPI), while EE, Vodafone and BT Mobile, along with broadband providers BT, Plusnet and TalkTalk rank it at the top of the measure of the lowest consumer price index (CPI).

The increases generally occur in April and are based on inflation rates in January or February of each year. It is estimated that, as a result, more than 20 million households are trapped by exit fees and price increases above inflation.

The current RPI rate is 9.8 percent and the CPI is 6.2 percent. Practice means, for example, that with O2 raising its rates this year by 11.7 per cent, a £35 a month talk, text and data package will increase by almost £50 a year. To escape the additional cost, a customer would have to pay the rest of their contract.

IDS: Cut taxes now or risk a 10-year crisis

By Anna Mikhailova, Deputy Political Editor, Mail on Sunday

The cost of living crisis will last a decade if the government doesn’t cut taxes now, a former Tory leader has warned.

Sir Iain Duncan Smith has warned that delaying tax cuts will plunge the UK into a recession from which it will take ten years to recover.

Sir Iain is one of several senior Conservative MPs urging Boris Johnson and Rishi Sunak to do more to stimulate growth.

The MP for Chingford and Woodford Green told The Mail on Sunday that raising interest rates without stimulating growth and failing to cut taxes will plunge Britain into a recession that “we will fight for a decade to get out of”.

Sir Iain said: “If we mess up and end up in a recession and high inflation, that will destroy a lot of businesses.” We can’t afford that. We have to keep growing, and the only way to do that is by lowering taxes.’

Sunak went ahead with an unpopular increase in the National Insurance tax just as households felt the full effect of inflation and rising energy bills.

Treasury sources have said new fiscal and spending measures to ease the cost-of-living crisis are unlikely until the fall.

Sir Iain said last night: ‘The Government has to do it now, not wait until November.’

Retired teachers June and Richard Nunn, both in their 70s, canceled their fixed contract with Sky TV when prices rose.

‘What’s the point of a contract when the provider can change it without you signing something new?’ said Ms Nunn, from Wandsworth, south-west London.

Greg Marsh, CEO of nous.cohe said: ‘This loophole sounds a bit like the police saying it’s legal to break into someone’s home if they’re warned beforehand.’

A Virgin Media O2 spokesman said: “This price increase will drive further investment in our network and services.” Vodafone said: “We set our prices clearly at the point of sale, in line with the latest Ofcom guidance.”

BT Mobile, EE, BT and Plusnet, all part of the BT Group, and TalkTalk said they adhered to Ofcom’s rules.

A spokesman for Sky, which also owns NOW, said: “Our goal is to keep prices as low as possible while still delivering content that customers love.”

An Ofcom spokesman said: “We are tightening our rules so that from next month customers get a simple example of how monthly prices will increase over the course of the contract before they sign up.”

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