Ofcom propose changes to automatically renewing contracts
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.
- Do nothing;
- Introduce a general condition aimed at providing the consumer with more information;
- Introduce a general condition preventing subsequent minimum contract periods once the initial one has ended
- 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.