Ofcom bans broadband rollover contracts - Broadband - News - Moneyfacts


Ofcom bans broadband rollover contracts

Ofcom bans broadband rollover contracts

Category: Broadband

Updated: 13/09/2011
First Published: 13/09/2011

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Rollover contracts, which tie landline and broadband customers into repeated minimum contract periods unless they opt out, will be banned from December this year.

The contracts, also known as Automatically Renewable Contracts (ARCs), roll forward to a new minimum contract period - with penalties for leaving - unless the customer actively opts out of the renewal.

However, Ofcom has now decided to outlaw the practice, with the ban applying to ARCs for landline and broadband services sold to residential and small business customers.

The regulator estimates that approximately 15% of UK residential consumers are on such contracts, with BT the largest communications provider currently offering them.

Other residential providers include Adept Telecom, Axis Telecom, Eze Talk and iTalk, while TalkTalk Business, Titan Telecoms, and Optimum Calls offer ARCs to business users.

"Ofcom's evidence shows that ARCs raise barriers to effective competition by locking customers into long term deals with little additional benefit," said Ofcom chief executive, Ed Richards.

"Our concern about the effect of ARCs and other 'lock in' mechanisms led to our decision to ban them in the communications sector."

The sale of new automatically renewable contracts to residential and small business customers will be prohibited from 31 December 2011.

All residential and small business customers currently on rollover contracts will have to be moved to alternative deals, so that the contracts are completely removed from the market by 31 December 2012.

Adam Scorer, director of external affairs at Consumer Focus, said the ban is extremely welcome.

"Rollover contracts can be confusing and penalise customers," he added.

"Many people have been unknowingly rolled over into another contract. This has left them unfairly tied into a contract which they had to pay a penalty fee to escape.

'This move by the regulator will help make it easier for customers to switch and get a better deal, and should help to make the market more competitive."

Find the best financial information for you -Compare Financial Solutions

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

Time to check your broadband?

Broadband is no longer seen as something that’s “nice to have”. These days, it’s an absolute must: setting up a new service is one of the first things people do when moving home, but many people forget to check their new area’s suitability.

Tougher approach to broadband adverts

Do you understand broadband adverts, or more specifically, how much you’ll actually have to pay for the deal? If not, you’re not alone – research previously found that such adverts were misleading, and now, tougher rules are set to come into force.

The true cost of a broadband deal

The cost of broadband is a point of contention for many households, and new research from wireless broadband provider Relish shows that consumers are currently losing out on £2.6bn per year by signing up to so-called deals…