Safer switching for consumers: Ofcom to strengthen rules on mis-selling

Ofcom today set out new proposals to stamp out slamming and other forms of mis-selling in the fixed line telecoms market.

It has also confirmed the introduction of new rules to stop misleading sales practices in the mobile market.

Slamming – where a consumer is switched to another provider without their knowledge and/or consent – is the most complained about issue to Ofcom in the fixed line market, averaging at almost 1,000 complaints each month over the last year. In the mobile market, Ofcom receives a large number of general mis-selling complaints where consumers have been given false or misleading information when purchasing services.

The proposals for the fixed line sector and new rules for the mobile sector are designed both to protect consumers and to enable Ofcom to take quicker and more effective action against communications providers that break the rules.

Proposed new rules for the fixed line market

Call recordings

Under the proposed new rules, communications providers would have to keep better records, including voice recordings of all telephone conversations relating to sales. Better quality records will assist Ofcom in taking enforcement action against providers that are engaging in mis-selling and making it more effective.

Explicit regulations

Ofcom proposes to simplify the regulations by explicitly banning mis-selling under the General Conditions – a set of rules that all communications providers have to adhere to. Communications providers breaking the rules could ultimately be fined up to 10 per cent of relevant turnover.

Clearer consumer advice

The proposed new rules would require communications providers to give better information to consumers by reminding them that there may be consequences from switching, such as possible termination charges for leaving a contract early.

Ofcom expects the proposals, if implemented, to substantially reduce the levels of complaints that it receives about fixed-line mis-selling. If it does not then Ofcom may consider other options.

The consultation on fixed line mis-selling can be found here: www.ofcom.org.uk/consult/condocs/protecting_consumers/ and closes on 27 May 2009.

Mobile mis-selling – new rules confirmed

Following a significant increase in the number of complaints about cashback schemes and other forms of mis-selling in the mobile market, the mobile network operators introduced a voluntary Code of Practice in July 2007 to tackle mis-selling and cashback issues. This voluntary Code did not lead to a significant reduction in complaints so in March 2008, Ofcom proposed new mandatory rules – called a General Condition.

Since this announcement, Ofcom has seen a reduction of complaints about mobile cashback. In early 2008 Ofcom received approximately 400 complaints per month and in December 2008 Ofcom received 28 complaints.

However, complaints about general mobile mis-selling over the last six months are at similar levels to those when the Code was introduced – averaging at around 200 a month – although they have fallen from a peak of over 300 a month in mid-2008.

Ofcom believes the new rules will provide consumers with better protection against mis-selling.

The rules state that providers must:

• not engage in dishonest, misleading or deceptive conduct and put provisions in place to ensure that those selling their products and services similarly do not mis-sell;
• make sure the customer intends and is authorised to enter into a contract;
• make sure consumers get the information they need at the point of sale;
• make sure that the terms and conditions of cash back deals offered by their retailers are not unduly restrictive; and
• carry out certain due diligence checks in respect of their retailers.

The new rules will come into force in September 2009 after which Ofcom will start an enforcement programme to monitor communications providers. If providers breach the rules they could be fined up to 10 per cent of relevant turnover.

The full statement can be found here: www.ofcom.org.uk/consult/condocs/mobmisselling/statement/.

Ofcom Chief Executive, Ed Richards said “Ofcom wants to stamp out mis-selling in the telecoms market so that consumers can get the best that competition brings. Our announcements are designed to tackle misleading sales practices in landline and mobile services.”

Ends.

NOTES FOR EDITORS

1. Advice for consumers on slamming can be found at: http://www.ofcom.org.uk/advice/guides/slamming.pdf.