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Ofcom propose changes to automatically renewing contracts
Thursday 03 March 2011 10:57:45 by John Hunt

Ofcom are proposing an end to automatic renewable contracts (ARCs) in the fixed-line phone and broadband industry citing them as a barrier to switching providers. Around 15% of landline consumers are estimated to be on these contracts which automatically roll-over your service for another minimum term unless you opt out. This means consumers often will face a penalty for leaving the service early, even if they have had the phone line from the same provider for many years. BT and several smaller providers offer contracts of this type for consumer landline services and some providers (such as TalkTalk Business) offer it on business products.

Ofcom are proposing a change to General Condition 9 (GC 9) to prohibit opt-out processes for renewals, and are suggesting these are implemented within 12 months of the GC being adopted so existing customers on affected contracts would not automatically renew. There are four options suggested for proceeding with this.

  1. Do nothing;
  2. Introduce a general condition aimed at providing the consumer with more information;
  3. Introduce a general condition preventing subsequent minimum contract periods once the initial one has ended
  4. Introduce a general condition requiring minimum contract period renewal to be an opt-in process.

Broadband users have also been subject to similar contract terms and there is often a discounted price available for taking a 12 or 18-month contract which will lock you in to the provider for that period. At the end of the minimum period of a contract, broadband providers often look to up-sell their newer products which in some cases may be cheaper or provide high usage limits within the product, but this isn't always the case, and will normally mean customers have to sign a new 12 or 18-month contract. There would be no change to how these products are sold.

The full consultation can be found on the Ofcom website.

Comments

Posted by timmay over 6 years ago
opt 3 plz
Posted by jrawle over 6 years ago
Why opt 3? I don't think contracts should renew automatically, but existing customers should have the ability to opt in to a new contract to get a better deal. Otherwise telecoms will end up like banking, where the best accounts are only available to new customers, while existing customers are stuck on poor rates.
Posted by AndrueC over 6 years ago
I don't see the problem. I was on a BT rolling contract for two years. They sent a reminder letter at the end in both cases. It laid out the options very clearly. I got cheaper calls in exchange for not doing something I didn't want to do anyway. In both cases I got a discount for signing up for another twelve months.

If people are too stupid to understand what they are signing and/or change their minds then why should I suffer? No-one forces people to sign up for these schemes.
Posted by tommy45 over 6 years ago
That will please bt retail ,not,lol hope they do stop auto renewing contracts,i was lucky as i took out a calling plan before bt started the auto renewing b/s, a rolling monthly contract after the initial min term is fine, & should like so across the board
Posted by AndrueC over 6 years ago
Stupid Ofcom. First they 'have a go' at perfectly good terminology 'Up to' now they are taking away my choices and an option to obtain a discount.

Are they ever going to do anything useful? I thought this government wanted to get rid of them.
Posted by herdwick over 6 years ago
@jrawle do you want contracts to be fixed term and cease automatically ?

In the ever declining standards of the UK we have forgotten that a *minimum* term is just that, you're still in a contract on an ongoing basis when it ends and it has a notice period probably of one month. No need to renew anything.
Posted by chrysalis over 6 years ago
whats good about 'up to'? lets sell a speed only 3% of people can get :) yeah right.
Posted by mike41 over 6 years ago
Good news. BT, like some insurance companies, renews contracts automatically "for the customer's convenience", hoping the customer won't notice the whopping increases in price after the first promotional year.
Posted by herdwick over 6 years ago
"up to" is an ASA requirement even on fixed speed services.

The ADSL service is rate adaptable, even if cretins don't understand it. A maximum is a maximum, irrespective of how many (if any) achieve it. See RevK comment.
Posted by m0aur over 6 years ago
As far as I can see, Auto-Renewing contracts are next to highway robbery. As for calling people stupid that sign up to them, take a look at the ISP sites. There is plenty of "Click here to sign up now", but I am damned if I have seen any prominent mention Auto-Renewal of contracts. It is not long ago that that shifty suppliers thought up the minimum contract wheeze. before that everything was om one months notice, rather like Post Office line rental still is.
Posted by otester over 6 years ago
As a firm believer in Darwinism, Option 1 please.
Posted by kojack over 6 years ago
We are supposed to be a democratic country where you have the freedom of speech and choice, yet little by little this is being taken away from us. When broadband started it was for a month at a time then 12 & 18 months now you have to stay with your provider as it is automatically renewed, let’s remember there is only one reason why any company would want to keep you in a 18month contract and then automatically renew it they provide a appalling service and it’s all about the share holders not the customer, the less well off feeding the rich and greedy.
Posted by kojack over 6 years ago
You should be able to opt out of any contract at any time if you are unhappy with the service you’re provided and if this was the case the standard of service would improve. I was with BT and entered into a 12month contract for telephone and broadband the full package I was given ten days to opt out of my contract if I was unhappy with the service but none of the services started till after the ten days, I was told my broadband speed would be 6mb I was only getting 1mb I took BT to court and didn’t have to pay then a penny.
Posted by kojack over 6 years ago
. But if I had the choice to cancel my contract right away I wouldn’t have needed to go to court it would have been a lot less stressful for me and my family and wouldn’t have tied up the court time.
Posted by kojack over 6 years ago
If truth be told Ofcom is a Joke when they do decide to do something it’s usually too late for many customers for instance broadband speeds up to now they want to do something about it when already for too many customers it’s too late. What happened to 1mb 2mb now it’s up to 8mb 20mb 24mb which no one ever gets, you should pay for the speed you get these company have a choice in decisions offcom make so why shouldn’t we have our say as we are the ones paying for the service and we should have a say in the term of the contract we enter into as well.
Posted by herdwick over 6 years ago
You can choose a monthly contract provider, about half of the ISPs offer contracts with 30 days notice. If you want the free activation and free hardware you my have to balance that against a 12 or 18 month minimum contract term.

We have plenty of freedom of choice, and plenty of sheeple that make the wrong one and then whine about it a lot.
Posted by kojack over 6 years ago
If we had plenty freedom of choice then why is ofcom looking into the matter of automatic renewable contracts. These contract benifit one person the businesses that impletment then like i said the greedy that arent able to provide the service they say they will, POINT MADE.
Posted by AndrueC over 6 years ago
@chrysalis:Adverts are full of baloney anyway. At least 'Up to 8Mb/s' or 'up to 24Mb/s' tells you what technology is in use and gives you a starting point for your own research. '75% of our users get between 4Mb/s and 7Mb/s' doesn't tell you anything useful.

What really matters is that the ISP points out that it's line specific and provides a way to get a personalised estimate.
Posted by AndrueC over 6 years ago
Some of you (a lot of you) don't seem to understand renewable contracts. I at least have been on one so I have experience of the way BT do it:

1.It was my choice to sign up. They didn't invite me to join. I found the product on their web site. Other products were available without the rolling contract.

2.You can get out at any time by paying the difference between the renewable contract and the non-renewable one.

3.When you get near the end of the period BT send you a letter setting out your options very clearly.
Posted by AndrueC over 6 years ago
No-one is forced onto that type of contract. It's easy and cheap to get out of. BT at least will remind you when the renew date comes along.

Yes, it benefits the business. Because of that the customer usually gets a sweetener. That's the deal. I benefited from the deal twice and would've gone for a third year if I could. Unfortunately the closest I could get was 12 months rental paid in advance. I got a discount for doing that.
Posted by AndrueC over 6 years ago
..but I might have got a better discount if the rolling contract option was available. If that's because of Ofcom's investigation then I wish they'd bog off.
Posted by audioslim over 6 years ago
About time in my opinion.

These contracts are for one reason only. To snare people who dont realise/realise quick enough/forget. They offer very little for the consumer.

Slim
Posted by john (Favicon staff member) over 6 years ago
@AndrueC whilst BT may be open about your options, at end of first contract period, other providers may not be. I suspect that is the main target of this, and because BT do it in some way too, it helps increase the numbers and make it look worthwhile doing.

The fact that it's a rolling 12month contract would be hidden in small print/T&C's and we know no one ever reads those things.
Posted by m0aur over 6 years ago
I don‘t call this BT being open about anything. http://www.productsandservices.bt.com/consumerProducts/displayCategory.do?categoryId=CON-TOTAL-BB-R1&s_cid=con_ppc_maxus_vidZ60_Broadband&vendorid=Z60
A prospective customer can click all the 'More Info' buttons they like, they will see no mention of rolling contracts. All BT are worried about now is big money grabs, like a years rental up front, switching from arrears to advanced line rental, dropping per second billing, connection charges, ever increasing rolling contracts … Blah blah
Posted by tommy45 over 6 years ago
Line rental saver may well give BT 12months money in advance,but the customer gets rewarded for it,by paying £9.50 a month instead of the normal price, and IRC the quarterly line rental was paid in advance too, as i had no intention of ceasing my landline service,i would of paid line rental anyway and paid more
Posted by m0aur over 6 years ago
@tommy45
I think you will find your so called “reward“ is £10•00 per month, not £9•50. How do you construe that as a benefit, if it is twice as expensive as competition, and prevents you moving to what may become a better and cheaper service.
BT OP3 BB + OP3 Phone £50•00 per month. The same from Post Office + free mobile & Int calls + no line rental tie-in £30•00 per month. Do the maths.
Posted by m0aur over 6 years ago
Paying for the top BT Phone & BB package, then still having to pay for weekend calls to mobiles & 40 international destinations. Penalised if you don‘t pay by direct debit, auto-renewal of ever-increasing contracts. Some ”reward“ — I can only guess at your idea of a penalty☹
Posted by tommy45 over 6 years ago
@m0aur I got line rental saver before they put it up,£9.50 is what i pay, and £5.99 a month for the unlimited calls plan,no auto renewals for me,but yeah the screw you on call charges to mobiles,answer is don't ring them with landline, as for bt broadband, i wouldn't even consider it,
Posted by tommy45 over 6 years ago
And further to that, bt or any other company should not be able to make a charge for paying them by cash, another reason for getting the line rental saver for me, it saved me a few quid for this year,the post office home phone is fine and works out cheaper,if you don't want to use your phone during daytime during the week, but if you did,you could end up paying more
Posted by m0aur over 6 years ago
As 0845 & 0870 calls to companies are free with the post Office, and calls to family & friends can for the most part be covered at evenings & weekends, along with free calls to other PO users & via Skype, we usually incur about £3•00 extra call charger per month — Total bill still well under £30•00. Extra call charges for 0845, 0870, mobile & bill payment option penalty with BT, used to make out total for both Option 3 options at least £50•00 per month.
Posted by tommy45 over 6 years ago
Calls to both 0845 & 0870 are free with bt calling plans too,as said the only bad point is they don't include free calls to uk mobiles,if the post office did a anytime call plan for say £14.00 inc line rental then they would be on a sure winner, but they currently don't do,So for some one who does need to make calls during the daytime on weekdays bt works out cheaper at the moment
Posted by otester over 6 years ago
To all those trying to justify this legislation, if you sign a contract, you have accepted it, if you couldn't be bothered to read it in the first place, tough!
Posted by m0aur over 6 years ago
@ otester
Before you call people stupid, and state a signed contract is accepted, possibly you should study the law.
Signed or not, an unfair contract is not legal and can be thrown out by a court. No mention of auto-renewing contracts on the BT sign up page seems unfair to me.
There are special rules that apply to distance selling in the form of the Office Of Fair Trading Distance Selling Regulations. http://www.oft.gov.uk/shared_oft/reports/consumer_protection/oft672.pdf
Posted by m0aur over 6 years ago
@otester
You should become familiar with it, along with unfair contract law http://www.oft.gov.uk/about-the-oft/legal-powers/legal/unfair-terms/guidance
Basically, distance selling where the customer may not be aware of what he is getting, has to offer cancellation options.
Posted by otester over 6 years ago
@m0aur

Could be argued that this system results in lower prices/better value.

Which longer contracts tend to involve.
Posted by m0aur over 6 years ago
With basic BT line rental with NO included features rising to £13•90p in April, and Virgin's January rise being followed by another to £12•99p in April, added to tie-in's and auto-renewal, it is a wonder the big four have any customers at all.
Posted by m0aur over 6 years ago
@otester,
Don‘t be silly. Auto-renewal of long contracts that are MUCH dearer than others, can only result in higher prices/bigger profit.
All of which, has little bearing on the contractual legality of auto-renewal, which is the subject matter of the thread, and what Ofcom will rule upon.
Posted by otester over 6 years ago
@m0aur

The law can't protect idiots against everything, best solution is education, shame people are too lazy nowadays, hence stupid.

Free market all the way, down with regulation!
Posted by m0aur over 6 years ago
Deliberately hiding contractual conditions, is breaking the unfair contract law. law should be obeyed. just because the BT & Tesco of this world are treating the public like idiots, does not mean they should get away with it.
Posted by otester over 6 years ago
@m0aur

If people didn't buy from bad companies, this wouldn't happen and bad companies would close up which is good for society.

Regulation is an excuse for societies lazy/dumbness.
Posted by steviegb over 6 years ago
Do away with BT's monopoly of the 'wireways' and maybe we will eventually hava a fair and competitive telecomms infrastructure, big mistake the government privatising the telephone network, its a bit like the railways and look how dreadfull that is! We're turning third world here. Its about time proper competition was allowed to prosper instead of a pretend one. That's the trouble with a class led system I suppose!!!
Posted by otester over 6 years ago
@steviegb

Privatizing wasn't the problem, it was inhibiting competition that caused the problems we have today.

Railway providers have limited licenses (10 years) so won't do any major investment.

VOA and other taxes have prevented the rise of other competitors to BT such as wireless and VM along with giving BT VOA waivers.

I think if there was no VOA tax, VM would have greater coverage still be expanding coverage along with other operators, 2 operators is better than none at the least.
Posted by audioslim over 6 years ago
Well this one has polarised opinion thats for sure.

When I was on BT's cheap 12 month deal and they wrote to tell me it was ending and could have it for x amount if I sign up for 12 months etc.

Well the penalty charges for leaving within that 12 months were about 4 times the ammount you would save over the 12 months.

That certainly isnt right in my books.

I spotted this with BT anyway and told them to stick it!.

Slim
Posted by wildthing666 over 6 years ago
Maybe they should do something about ISPs who expect their customers to fork out for the remaining months of their contract when they say they cannot provide a service at a new property even when that property is serviced by the same exchange. I don't want to end my contract with the present isp but they say they cannot supply me even though their website says they can
Posted by otester over 6 years ago
@wildthing666

If I recall correctly that is already covered under unfair contract law.

See this:

http://www.oft.gov.uk/shared_oft/reports/consumer_protection/oft672.pdf
Posted by litesp33d over 6 years ago
Try getting out of a LLU contract without losing your phone number or having to move back to BT.
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