Mis-selling of telecoms services

Why does it Happen?

• All a telecoms company has to do to transfer a customer's calls or service is to send the customer's telephone number and postcode electronically to the BT Wholesale order system.

• When originally introduced, there were safeguards in place to avoid abuse of this process whereby prior checks were made before any transfer took place.

• BT's competitors persuaded Oftel (now Ofcom) to dismantle these safeguards, and introduce a system whereby the "gaining" and "losing" companies both write to the customer - after the transfer order has been sent to BT Wholesale. The customer then has 10 days to cancel the transfer, or it goes ahead whether authorised or not.  Returning to BT takes a further 10 days.

• The industry claimed this would guarantee there would be no mis-selling, but this has been proved wrong.

• About 20% of all CPS orders are cancelled - a sign that mis-selling is rife in the industry. 

What is Ofcom doing about it?

Ofcom issued a Statement and Consultation document on 22 November setting out its view that all Communications Providers should have to establish Codes of Practice on sales and marketing in accordance with published mandatory guidelines.  Ofcom would have powers to take enforcement action in the event of breaches, including powers to impose financial penalties for non-compliance. Comments are invited by 7 January 2005.

What is BT's view?

BT will be responding to the Ofcom consultation, supporting mandatory Codes of Practice but also urging greater clarity on how Ofcom plan to deal with breaches, asking for a review after 6 months of operation, and suggesting that other solutions, such as third-party verification, should also be considered. Above all, there needs to be a proactive approach to investigation and enforcement and clearly-understood sanctions, if telecoms is to avoid the problems faced in the energy industry. In the meantime, BT is continuing to raise instances of mis-selling with individual operators and Ofcom on behalf of its customers, and, where appropriate (for example, with IP infringements), taking legal action.

What more could be done?

Other countries have developed solutions. In the USA, transfers have to be "verified" by a neutral third party, and there are fines of $50,000 per customer for slamming.  In Ireland, and much of Europe, the losing company can challenge the gaining company to produce evidence that the customer has agreed to transfer.