Home phone Guides

Rollover phone contracts: what you should know

Friday 11 March, 2011

By Becca Talbot - becca@consumerchoices.co.uk

Rollover contracts are notorious for locking customers in, leaving them unable to switch to a cheaper home phone deal. So, what can you do if you find yourself tied into a rollover contract?

Telecoms regulator Ofcom estimates that 15% of UK homes are locked into a rollover contract for their home phone service, meaning it is impossible for them to switch to a cheaper provider without paying hefty cancellation fees.

If you’re one of these households, or you know someone who is, this guide is for you: we explain what rollover contracts are, how you can get out of them and what Ofcom is doing to combat them…

What is a rollover contract?

A number of landline providers, including BT (www.bt.com), use rolling home phone contracts, which tie you into a line rental deal for 12, 18 or 24 months.

This kind of contract automatically renews itself after its initial minimum contract period has ended, unless you actively opt out during the switching window.

This means if you don’t tell your provider you are changing to another package and/or provider, you will be automatically locked in for another 12, 18 or 24 months. You will then be unable to leave the contract without paying a cancellation penalty - this could be anything up to the total cost of the remaining months of your contract.

The switching window is usually a month before the contract is due to end, and Ofcom says the provider has a duty to notify the customer that their deal is ending soon. However, the system of how and when a provider should tell a customer is not set in stone, and there are no rules in place to help customers who don’t receive their notifications because of postal strikes and delays.

Rollover contracts have come under fire on numerous occasions, and many consumers feel providers tie customers in unfairly. And it’s not just home phone contracts; many broadband providers also lock customers in with an automatically renewing 12 or 18-month package. If you’re tied into your broadband contract, read our Early termination fees guide for more information.

The cost of a rollover contract

Ofcom’s policy on early termination charges says customers should “never be charged more than the cost of the remaining contractual payments, less any savings the company makes from no longer supplying your service.”

Under the new charges, customers with phone-only packages from BT, must pay fees of between £2 and £5 per outstanding month, depending on the package.

So, if you’re a BT customer on its Evening & Weekend call plan with seven months left on your contract, you’ll have to pay just £17.50 to leave your contract, instead of the previous charge of £101.71. If your provider is threatening that cancelling your contract will incur massive charges, be sure to read its policy in your contract terms and conditions, and consult with Ofcom.

What is being done about rollover contracts?

Ofcom says “it has some concerns about rollover contracts,” and is currently looking into the practice.

It believes rollover contracts make it harder for customers to switch provider and consequently reduce the benefits of competitive choice. “For individual customers, this can mean that switching is made unattractive as the costs involved are unexpectedly high,” the regulator added.

It is hoped that Ofcom will crackdown on providers offering rollover contracts, and may ban them completely. The regulator is investigating the contracts and will make its decision by 12 May 2011.

BT, who offers the contracts, says it always gives customers 30 days to opt out of a renewal, and customers often receive a cheaper deal when signing up to a rollover contract.

A spokesman for the BT, the UK’s biggest home phone provider, says that there is no evidence that its customers are unhappy about the contracts and that it didn’t feel they hinder competition.

“We have worked hard to make sure that customers understand what they are signing up to, including how the renewal works and the charges that apply if they choose to leave early,” says BT.

If the plans are given the go-ahead, Ofcom will have the power to fine any companies that continue to use such contracts up to 10% of their turnover.

How to get out of a rollover contract

If you end your contract after receiving you receive your reminder notice that the minimum contract period is due to, you will not incur any charges.

However, if you miss the switching window and want to end it before the new minimum contract period is up, in most instances you will have to pay early termination charges.

Ofcom advises customers who are worried they have been locked into a rolling contract to:

1. Check the terms and conditions of your contract - See what commitment your provider has made to remind you of when the minimum contract period is due to end and be renewed, and find out how it will remind you (ie by post or by email)
2. Speak to your provider - If you are concerned that your provider hasn’t fulfilled its reminder commitment (the reminder notice coming much later than it should have, leaving you little time to decide what to do, or it arriving after the last date you could opt out for example), you must speak to your provider.

If you’re having difficulties with your supplier about getting out of a rolling contract, you can contact Ofcom on 0300 123 3333 or 020 7981 3040.