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Should you be charged for leaving your broadband contract early?

Thursday, June 21st 2018 by Phil Wilkinson-Jones

It’s generally the case that by signing up to a broadband deal, you’re committing to at least a 12-month contract. You can leave before the end of the contract, of course, but the chances are you’ll end up paying a hefty cancellation fee.

These early termination charges are written into the terms and conditions of your broadband contract and providers are generally well within their rights to charge them.

But that doesn’t stop these charges feeling a touch harsh, especially if you’ve been a loyal customer for many years or if the circumstances around your leaving are out of your control.

So are cancellation fees unfair? Well, Ofcom thinks some of them might be. The regulator said last month that Virgin Media could have broken customer protection rules with some of the fees it had levied on its customers.

Specifically, Ofcom said Virgin charged fees that are too high and required customers moving to a new home to either sign a new contract or pay a fee to leave.

Ofcom, which receives about 90 complaints a month relating to early termination charges compared to about 110 per month in 2017, has also recently opened an investigation into EE's compliance with its rules surrounding cancellation fees, specifically whether it put customers off switching by charging them too much to leave.

'Grossly unfair'

Ian and Karen Pemberton told Cable.co.uk they are being charged £145 for cancelling their Virgin contract, even though they’d be happy to stay with the provider when they move house.

The couple, aged 56 and 47 respectively, are downsizing from their four-bedroom house near Nottingham to a new home by the coast in Hornsea.

They’d be willing to stay with Virgin after the move as they are happy with the broadband service the get from the provider, but when Mrs Pemberton phoned up she was informed that Virgin’s network doesn’t cover the new address – and that they’d be charged a fee for cancelling as they only entered into a new contract last December.

EE and Virgin Media are both suspected of breaking customer protection rules around cancellation fees

“She [the Virgin employee] said they only supply 50% of the country and that is in their terms and conditions. I told her that I didn’t know that and asked if people really do choose to move to areas based on whether Virgin supply a service there,” said Mrs Pemberton, who works in sales for a plastics company.

“She said ‘oh you’ll be surprised’ but I would be very surprised if that was true.”

Mr Pemberton, who works in warehousing, described the charges as “grossly unfair”, adding: “If we were actively looking not to use the service then that would be fair enough, but that’s not the case.”

A Virgin Media spokesperson said: “We make it clear to customers that early disconnection fees can apply and we also offer 30-day rolling contracts for those that do not want to sign up for a minimum period, such as 12 months, and need more flexibility.”

'Not fit for purpose'

Virgin pointed out that Ofcom has not said Virgin cannot charge early termination fees when a customer wants to leave their contract before the end of the minimum term – and says it has refunded a number of customers who were overcharged for cancelling.

It also said customers moving home to another area served by Virgin Media can now continue their existing contract rather than having to sign a new one.

But there are multiple other reasons why you might want to leave a contract early – what if, for example, the service you were getting just didn’t live up to your standards?

Paul Cooke was charged £94 for leaving BT despite having experienced a number of problems with his broadband including seemingly poor range from the router and reliability issues.

“It would just stop two or three times a week for up to an hour,” he said. “This sometimes meant I got the orange flash of death on the box, sometimes not. It was also not fit for purpose because it struggled if my son streamed and I tried to download a film.”

Ofcom receives about 90 complaints a month regarding broadband early termination charges

Mr Cooke, a company director, decided to switch to Virgin after being offered a better deal but said he was “shocked to find after being a customer for more than 20 years and given their service is not fit for purpose they were going to hold me to a £94 cancellation charge”.

The 42-year-old said he doesn’t think the charge would stand up to a legal challenge and would have understood the charge had he not had such poor service.

“A judge would launch it out of court but I don’t have time for that hassle,” he said. “I think contracts should be honoured if signed but cancellation charges when there have been issues should not be enforceable in my opinion, especially when significant loyalty has been demonstrated.”

BT says in its terms and conditions that customers within their minimum term contract may have to pay a fee for cancelling early, but adds that those with “regular or repeated, continuous or irregular faults” with their broadband could be allowed to leave for free, subject to BT’s agreement and an individual assessment.

Right to leave

Ofcom’s codes of practice, which sets out how providers are expected to conduct themselves, includes the provision for customers to exit their contract if their broadband speed falls below a minimum guaranteed level.

The regulator advises people to contact their provider if they’re having problems and says that if the problems are with its network, your provider must offer you the right to leave without paying a financial penalty.

But Ofcom warns that if the problem is inside you home (it gives wi-fi signal and home wiring as examples), then your provider will offer advice but it’s up to you to sort it. So external factors that may affect your wi-fi signal, such as where you position your router, aren’t going to get you out of that contract for free.

Appealing to a provider’s better nature in the light of unforeseen life changes doesn’t always work, either. Back in 2015, Lee Jarratt was told he would have to pay £350 to leave Hull-based broadband provider KCOM.

Mr Jarratt had been a customer of KCOM, then known as KC Broadband, for five years and had recently upgraded to fibre but was planning to move house after splitting from his long-term girlfriend. He explained his situation to an advisor, but the charge still stood.

KCOM told Cable.co.uk its early termination charges were “significantly lower” than the full amount a customer would during the minimum term of their contract and said it would waive the fee if the contract could be transferred to someone else living in the same property.

Ofcom is strengthening its codes of practice so that the right to exit a contract (when you’re suffering slow speeds) applies to phone and TV services bought at the same time as broadband. This change will come into effect in March 2019.

A final decision regarding the Ofcom investigation into Virgin Media’s early termination charges is expected by the end of the summer.

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