Tuesday, 22 March 2011

Ofcom update: Proposals to ban automatically renewable contracts

Ofcom has set out proposals to ban automatically renewable contracts that tie consumers with landlines into repeated minimum contract periods unless they opt-out.

Ofcom is concerned that rollover contracts make it harder for customers to switch providers and consequently reduce the benefits of competitive choice.

These contracts are currently offered by BT and several other smaller companies to residential and business users of landline services and automatically roll the customer forward to a new minimum period contract unless the customer actively opts out of the automatic rollover.

Ofcom is proposing to amend existing rules to prohibt opt-out contract renewals in any form in the landline and broadband sectors. If Ofcom proceeds with its proposals then any provider who continues to offer this type of contract could face enforcement action including a financial penalty of up to 10% of turnover.

Ofcom has powers under sections 45- 47 and 51 of the Communications Act 2003 to set rules governing how Communications Providers are allowed to provide their services to members of the public. These rules are known as “General Conditions”.

Read the full release of the Ofcom proposal
The Ofcom consultation document can be found here

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