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Millions of people could be in line for compensation under Ofcom’s new guidelines

MORE than 10m consumers hit by “unfair” fees for their phone, TV or broadband service may win compensation after Ofcom, the regulator, announced a crack-down on rip-off charges.

In a move mirroring the dispute over bank charges, Ofcom is issuing guidelines this autumn to ensure charges are “demonstrably fair” and reflect the true cost of collecting the money.

When the Office of Fair Trading applied the same rules to overdraft charges it sparked a huge consumer revolt, as more than 2m customers made a compensation claim.

Steve Weller, telecoms expert at comparison firm Uswitch said: “If you look at the banking sector, it only takes a few individuals to successfully argue their case to start a momentum.”

Weller believes even more people could have a claim against home-services providers. The bank-charges case centred on fees imposed for things people should not have done, principally going overdrawn. The charges levied by telecom and broadband firms are for basic services such as paper bills, which many people prefer.

“This makes their case for refunds much stronger,” he said.

Fees are imposed for itemised bills, not paying by monthly direct debit, and using cheques as a payment method.

The Ofcom inquiry will also investigate charges for late payments, and fees to restore a service that has been restricted due to nonpayment.

Uswitch estimates consumers lose £237m a year in additional charges on phone bills alone.

Cristina Rebollo, 30, from west London, who works in marketing, pays an additional £1.25 a month to receive paper bills from BT.

“I prefer paper bills. I’m looking for a mortgage so they are useful as identification documents,” she said.

Ofcom confirmed its review uses the same legal framework employed by consumer groups to challenge bank charges.

Its proposed rules do not outlaw extra charges altogether. Instead, it says they must be “prominent and transparent”.

A spokesman said: “It is up to individuals to take the matter up with their provider to seek compensation through the courts if they feel charges are not fair.”

Disgruntled BT customers are already preparing to challenge the firm in the small-claims court after it announced an increase in charges for paper bills. An estimated 9m customers who receive their bills this way will see charges go up by 75p a month an additional £9 a year. The new rate will take effect from April and will net the firm an estimated £80m, according to Uswitch.

Virgin Media charges a staggering £60 a year for customers who do not pay by direct debit, and 400,000 pay the charge � an additional £24m for the firm.

Weller said: “While there may be environmental benefits to receiving bills via e-mail, it has to be about consumer choice too.”

As part of its investigation, Ofcom is also looking at charges imposed when customers break a phone contract early.

It said: “A consumer who ends a contract early should never have to pay more than the payments left under the contract period. In fact they should often pay less than this, to reflect the costs providers will save.”

Once the Ofcom guidance is finalised, the regulator will give firms three months to comply.

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