The announcement of a new class action against three of the top mobile phone service providers comes after years of discussions about the “Loyalty Penalty” paid by millions of consumers every year.

The class action is brought on behalf of the majority of customers of EE, Vodafone, and Three and is estimated to affect up to 28.2 million contracts where customers are continuing to pay the same contract price after the initial period of the contract and therefore after their mobile phone handset has been paid for.

The key legislation providing protection for consumers is the Consumer Right Act 2015, which includes:

• The right to a refund of money paid for goods which have not been received
• The right for a consumer to be charged a reasonable price for services provided
• Protection from unfair contract terms which increase the price payable under the contract without giving the consumer the right to cancel the contract rather than pay the higher sum
• Protection from unfair contract terms which give traders the discretion to decide the price payable under the contract after the consumer has become bound by it, unless the price is agreed before the consumer is bound by it.

As many mobile phone providers are not distinguishing between the price attributable to the payment for the handset and the price payable for the airtime services, and many providers set out from the outset that the charges will continue after the initial term, there is an apparent gap in protection for consumers.

Citizens Advice has been a key factor in bringing this issue and the gap in protection to light following their “super complaint” about loyalty penalties in 2018, which forced Ofcom to take action to protect consumers from higher prices for remaining with their service provider.

Following the conclusion of the “super complaint”, in February 2020 Ofcom introduced new rules which require phone companies to notify consumers at least 10 days before the end of their contract.  The notification must include:

• When the contract term ends and any notice period required to leave the phone provider;
• What the current payments are, and what the payments will be after the date that the contract ends;
• The phone provider’s best deals, including prices available to new customers.

Notwithstanding the above, the advice remains that consumers should be aware of their contract term and should switch contracts or providers as soon as possible once the contract term has ended.  The provider’s notification will advise consumers about the best deals available with that provider, however consumers are encouraged to shop around as other providers may have better deals available.

Many consumers will now face an anxious wait for judgment to be given on this case as a judgment in favour of the consumers could lead to more claims across the industry for consumers who suffer from higher prices by remaining loyal to their provider, known as a “loyalty penalty”.

How are consumers affected?

A class action case has been issued on behalf of all consumers who have been affected by this issue, and you do not need to do anything unless you would like to opt out of the claim.

Alternatively, Ofcom strongly recommends that consumers keep track of the key dates within their contract and to switch contracts or providers to ensure that they benefit from the best deals available.

If you find yourself in a position where you have been overcharged by your mobile phone provider, then you may be entitled to issue a claim against them for the amount overpaid.  You should be aware that any claim against your provider must be brought within six years of the charges taking place. If you wish to bring a claim, you should first:

1. Raise a complaint with your mobile phone provider using that provider’s complaints procedure.
2. If the provider does not give a satisfactory response after you have completed the complaints procedure, you should then raise a complaint with the communications regulator, Ofcom.
3. If, after following Ofcom’s complaints procedure, you still have not received a satisfactory response, formally inform your mobile phone provider that you intend to take legal action and set out your case in full with any evidence that you have available to you.  You should give your mobile phone provider 14 days to respond.
4. Following the 14-day period, you may then choose to issue your claim within the County Court.  If your claim is less than £10,000 then this claim can be issued online.

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