When billing goes bad: O2 fined £10.5m for overcharging customers

O2 is the latest UK telecoms provider to be fined by industry regulator Ofcom for overcharging customers, but why does this case in particular paint the regulator in a troubling light?

O2 has been slapped with a £10.5m fine after Ofcom found them to be overcharging customers who terminated their pay monthly services between 2011 and 2019.

Over 250,000 customers were incorrectly billed a total of £40.7m, though only roughly 140,000 of them paid the extra charges – approximately £2.4m or 6% of the total.

Of the remainder, around 26,500 avoided paying due to, in the words of Ofcom, “their own (in)action”, whilst over 85,000 customers who were overcharged by a whopping £35.9m apparently didn’t bother paying having already been disconnected for non-payment of bills anyway.

After being notified by the British Approvals Board for Telecommunications (BABT) of a Category 1 Extraordinary Performance Failure (EPF), Ofcom launched an investigation, finding that the billing error “arose in four different scenarios,” including duplicating final direct debit payments from customers who terminated their contracts on a Saturday or Sunday, with outstanding charges due on their account.

The regulator declared that, between 2011 and 2019, O2 “fail[ed] to render or make available accurate final bills to customers after their cancellation of services.”

O2 has accepted the findings after cooperating with the investigation, seeing its fine reduced from £15m, and quickly refunded the customers affected, plus 4% - small comfort for those whose credit rating may also have been affected. For those customers that they were unable to reach, a donation to charity for the amount they were overcharged has been made.

It has also “changed its billing processes to prevent this issue arising again,” though the nature of these changes are, as yet, unclear; Ofcom’s full report is currently being prepared and will be published in the not-too-distant future.

Meanwhile, a second investigation, focusing on whether or not O2 breached Section 135 of the Communications Act – calling for providers to submit to Ofcom “all such information as they consider necessary for the purpose of carrying out their functions” – is still underway.

Concerningly, however, these issues were first identified and reported way back in 2011, but, according to Ofcom, “efforts to address these problems were not successful and customers continued to be overcharged.” Gaucho Rasmussen, Ofcom’s enforcement director, said “these billing issues continued for a number of years without sufficient action from O2.” Nonetheless, they were able to carry on unabated.

Though Ofcom called the fine “a significant penalty” that would “act as a deterrent against future breaches,” the £10.5m amount is hardly a dent in the company’s £6.2b annual revenue – a 0.16% dent, to be precise.

This is only the latest penalty levied by the UK’s industry regulator on a mobile provider for overcharging their customers; in January 2017, EE were fined £2.7m for charging subscribers for calls to its free 150 services number, only to later be hit with another £245,000 fine three years later for overcharging subscribers for calls to 118 directory services numbers.

Later that year in November, EE (once again) and Virgin Media were fined a combined £13.3m for overcharging customers who ended contracts early for “fail[ing] to make sufficiently clear the charges customers would have to pay if they ended their contract early.”

If only relatively modest charges will ever be brought against large corporations with huge annual turnovers, then there is little motivation to avoid these mistakes. The news has done very little to besmirch O2’s reputation, as their customers and revenues have continued to grow.

The £10.5m (even the original £15m) fine pales in comparison to the approximately £40m they potentially stood to gain in overcharges – charges that were only not paid because of customer action (or rather inaction), not due to the actions of the regulators.

In contrast, these same companies could be – subject to draft legislation – fined £100,000 per day if they’re found to be using Huawei network equipment after 2027. Shouldn’t similarly harsh penalties be in place for those who negligently overcharge their customers? O2’s honesty was the only reason the matter came to light – a more unscrupulous provider may not be so generous.

As we’ve written about before, telco businesses have a responsibility to be honest and forthcoming with customers about what they are being charged for and how they are being charged. Providers owe it to their customers to deliver a degree of self-governance and ensure that their billing processes are up to snuff, lest they become the name behind the latest overcharging scandal.

Update [12/02/2021]: Ofcom has today published its full report into O2, finding the firm "contravened
GC 11.1 (and subsequently GC C3.2) by failing to render or make available accurate final bills to be
issued to customers after their cancellation of services."