There’s been some good news about broadband charges – or at least what I’m hoping will be good news.
Ofcom has said the exit fees of up to £240 Virgin Media charges customers if they move and it doesn’t supply their new home, may be too high and may put people off switching.
While this is a small step – Ofcom hasn’t actually said what Virgin needs to do to put the situation right – it’s a move in the right direction and comes after months of campaigning from us for these fees to be refunded and abolished.
Ofcom launched a formal investigation last summer into the fairness of its terms and conditions around leaving a contract early
After being approached by scores of angry Virgin customers, last year we wrote several stories about the hefty fees being charged when they decided to move and Virgin wasn’t available at their new home.
We presented a dossier of these reader accounts to both Virgin Media and Ofcom.
This was accompanied by evidence from a lawyer we approached who concluded that if a contract says a consumer has to pay a certain sum of money, whether or not the service provider can easily find another customer to replace them, it is potentially unfair.
Following this, Ofcom launched a formal investigation last summer into the fairness of Virgin’s terms and conditions around leaving a contract early.
It has now said, in an update to the investigation, that it has ‘reasonable grounds to believe’ that Virgin contravened rules by setting and charging customers early termination fees which are too high. It also said Virgin failed to publish clear and up-to-date information around the early termination fees on its website.
Virgin now has to respond to the regulator and the final ruling will be published at the end of the summer.
As I said last year, I believe there is no other option but for Ofcom to tell Virgin it needs to refund all of those people who have had to pay an exit fee if they’ve moved home during a contract and Virgin wasn’t available at the new home.
This should not only be the fee, it should also include interest, which should reflect the highest amount they could have earned if the money was in a savings account.
While it’s a big cost to the firm, £240 is a lot to a consumer in a time of squeezed incomes
The fee should also be abolished immediately for those moving house and wanting to take Virgin with them.
I also think the fee for exiting the contract – for whatever reason is given – needs to be lowered to something more reasonable. Sky, for example, charge customers a basic service fee for the remainder of their contract if they leave within the fixed-term period. In fact a universal system decided upon by Ofcom for all telecoms providers to calculate the exit fee would be the fairest way to go forward.
Not only is the fee unjust when it comes to moving – it’s not the customer’s fault Virgin doesn’t supply their new home – it’s outrageously high.
Virgin can’t lose out on up to £240 every time someone leaves early, especially as there is a good chance whoever moves into the property next may sign up to it and therefore it doesn’t really lose out much at all.
When someone leaves Virgin early and breaks the contract, they are charged a fee depending on how many months of their contract they have left.
This amount depends on how much they’re currently paying, but the maximum amount is capped at £240.
Virgin runs on its own fibre network, separate to BT’s Openreach which all the other major providers use. It’s available in around 40 per cent of the UK so the chances of moving to a property where it’s not available are reasonably high.
Therefore it’s unlikely to want to pay out compensation lightly, especially as there could be millions of people who have paid these fees in the past.
However, while it’s a big cost to the firm, £240 is also a lot to a consumer. Virgin should also benefit in the long run as without these extortionate fees customers will be more likely to stay with it for longer or return next time it is available.
This is the only ruling I think Ofcom can reasonably take in order to rectify the shoddy behaviour which has been going on for far too long.