Ofcom has announced a ban on inflation-linked price rises for mobile phone and broadband contracts.
The regulator has also introduced new consumer protection rules that will force companies to detail any price rises clearly in pounds and pence. It needs to be set out prominently and transparently, at the point of sale, and providers will need to be clear about when any price changes will occur before a customer signs up.
The new rules and guidance will come into force for new contracts from 17 January 2025.
Ofcom said in a statement, “Providers must draw information about in-contract price rises information to the customer’s attention prominently before they are bound by the contract, in a clear and comprehensible manner (including during a sales call or other verbal sale such as an in-store sale) to enable them to make an informed choice. Providers must also set out when any changes to the monthly price will occur.
“Providers may increase their prices during the contract period and the new rules do not restrict their ability to set the level of their prices. However, they will prohibit providers from including inflation-linked, or percentage-based, price rise terms that apply to the core subscription price in new contracts. This will give consumers clarity and certainty about the price they will pay, helping them choose the best deal for their needs.”
In recent years, many major UK phone, broadband and pay TV companies have changed their contract terms to include price rises that are linked to future inflation rates. These annual price rises have often been compounded by an additional 3.9 per cent each March or April. As of April 2024, it was estimated that around 60 per cent of broadband and mobile customers were locked into contracts subject to these unpredictable increases.
Ofcom said that this leaves customers without sufficient certainty and clarity about the prices they will pay, and unfairly assuming the risk and burden of financial uncertainty from inflation, which is something people cannot predict and do not understand well.
As a result, the watchdog said that it had decided to ban this practice.
In December 2023, Ofcom consulted on making changes to its general conditions, requiring providers, where they apply in-contract price rises, to set these out upfront, in pounds and pence, at the point of sale.