Mobile Phone Companies (Ofcom Supervision)

Siobhain McDonagh Excerpts

Wednesday 5th November 2014 Westminster Hall

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

I did not know that today was going to be such a big day for the mobile phone industry and its regulation. I want to address the issues of some of my constituents and the customer service that they have received from a number of providers.

The first case is that of Mr C of Mitcham, who contacted me on 17 May 2013—I am sorry, I will give many dates, but they are important. He described how EE was pursuing him for an outstanding telephone bill for the months of November and December 2012. Mr C had taken out two contracts with Orange in October 2010 in the understanding that both had unlimited landline calls. EE claimed that that was not the case and that he only had unlimited landline calls on one line, so for those two months he owed the company £1,341.99 for calls made to UK landlines.

Mr C was distressed by the situation and asked for my help on 17 May 2013. At that stage, EE had offered a discount of 25% as a good-will gesture, but it did not address Mr C’s central point that he was mis-sold the second line. I met with EE’s David Frank, senior public affairs manager, and Dan Perlet, director of corporate and financial affairs, on 11 June 2013 to discuss Mr C’s issue. As a result, I had a letter from EE, dated 26 June, in which it agreed to waive 75% of the outstanding amount. EE made it clear that if Mr C accepted the offer, both sides could consider the matter closed. Mr C accepted the offer and asked for a final invoice confirming the revised amount outstanding so that he could settle the account.

As I said, the dates are important. On 8 May 2013, nine days before Mr C came to see me and a month before I was buying Mr Frank and Mr Perlet of EE cappuccinos in Portcullis House, EE had issued a default notice against Mr C. Furthermore, on 29 November 2013 EE sold the full debt, without the agreed discount of 75%, to Lowell Group, a debt collecting agency. Again, that was done without Mr C’s knowledge.

When Lowell Group staff contacted Mr C early in 2014, he challenged them and explained that an arrangement had been made with the senior public affairs manager at EE. Lowell Group said that EE denied that any meeting between myself and its senior public affairs manager had ever taken place, even though I have a letter—which I can produce now—confirming the meeting and its outcome. I have been trying to contact EE by letter, e-mail and telephone since the beginning of the year. I was, however, unable to obtain a response until eventually, ahead of the debate, I got a reply dated 3 November.

This is a catalogue of poor communication and miscommunication. EE had not been transparent in its communication with Mr C, and placing a default notice against his name had implications that he was entitled to know about. Other credit providers are obliged to communicate such actions, but the first that Mr C knew of the notice was when he applied for a loan and the application was declined. EE had not communicated internally regarding the case. Whoever decided to sell the debt either ignored the agreed settlement arrangement or was unaware of its existence. EE had not communicated all the facts regarding the case to Lowell Group. In selling the full debt and in denying that its representatives had met with me, EE has misled the debt collectors and wasted their time. To cap it all, Mr C is still waiting for the final invoice confirming the reduced balance outstanding, so that he can settle the account and “consider the matter closed”, as stated in the letter from EE to me on 26 June 2013.

That all demonstrates a disregard for the well-being of a customer who has put his trust in a service provider—EE in this instance. The company’s attitude has been relentless and inflexible, with a cavalier disregard for the welfare of a customer who has felt bullied and intimidated for more than 18 months.

In its letter of 3 November 2014, EE apologised unreservedly. It has now called off the debt collection agency and cancelled the debt entirely. It will also take immediate steps to have the default notice removed, although that alone does not repair the damage to Mr C’s credit rating, since he has been declined a loan—which, in the first place, was because of the default notice. It should not have taken the intervention of an MP to resolve the situation.

My second constituency case is that of Ms O of Colliers Wood. Ms O made the mistake of tethering her mobile phone to her new tablet in early July 2014. Her August phone bill showed nothing particularly unusual, but she was hit by a staggering bill of £540 in September. Once aware of it, she was able to avoid a similarly exorbitant bill in October, although it was still £289. As soon as Ms O was aware that a large bill was due in September, after she checked her bill online, she made repeated attempts to speak with someone at Vodafone for advice. Each of the five people she spoke to between 27 August and 9 September, whether in store or over the phone, either referred her to another department or gave her conflicting advice.

As someone who always pays her bill on time, Ms O was concerned about the financial burden of having to pay the whole amount in one go. She wanted to discuss the possibility of remission of some of the bill and the option to pay in instalments. The customer service staff whom she spoke to in the early stages were not entirely helpful. When Ms O asked for an e-mail address for her to contact, she was told to write and post a letter—that was by a mobile phone company!

Not satisfied with the response, Ms O investigated the Vodafone website and was able to deduce the name and e-mail address of the chief executive officer of Vodafone UK—he must have been delighted. She sent him an e-mail on 15 September 2014 and, following her success in contacting the CEO’s office directly, she was more successful in negotiating a partial resolution. Through further dialogue, a “bill shock” reduction of 10% of the data charge, or £70, was agreed, with a further reduction of £106 as a good-will gesture. Ms O’s persistence therefore paid off in the end, but it took just that, persistence, as well as ingenuity and investigation to get through to the right people— people who had authority to make decisions.

That is another example of a large service provider being elusive and difficult to communicate with. Although Vodafone has a variety of ways for customers to track data usage, they mainly depend on the proactivity of the customer. I believe, however, that a mobile phone service provider has a responsibility to support customers in managing their accounts.

The third resident of my constituency to approach me, just last week, was Mr B from Morden. He is an Orange customer and frequently calls overseas using a facility offered by Lycatel, whereby he may call a UK landline number from his mobile phone to gain access to an international line. He called Orange to upgrade his contract to an unlimited calls package. When he mentioned the reason for upgrading to the Orange customer service agent, she advised him that Orange monitors the use of such landline numbers and that if it discovers that he is using one of them it will charge more than 30p per minute for calls.

Mr B contacted me because that contradicts the terms of his contract, which states that he has unlimited calls to UK mobiles and landlines. He is worried that he will end up with a huge bill if or when Orange discovers he is using the services of Lycatel. That does not seem to be a fair, open or transparent way for Orange to behave. In fact, it seems underhand.

Given those cases, I want industry standards monitored by Ofcom whereby a requirement is placed on mobile phone companies to be open and transparent with customers. They should behave reasonably in line with regulated credit providers, which are bound to inform customers about action being taken that may affect their credit rating before it happens. They should alert customers if there is unusual activity on their account, similarly to how banks monitor and notify customers of unusual activity.

I would like to see mobile phone companies acting responsibly and in the interests of their customers by offering recommendations about cheaper tariffs based on past and recent usage. That service is already offered to customers by some energy providers. There are examples of best practice in the industry. Will the Minister request that Ofcom be given the authority to ensure that those examples are made universal and to recommend industry standards that will work in the interests of all customers, however able they are to be detectives and look at what their mobile phone companies are doing to them?

[The Minister for Culture and the Digital Economy (Mr Edward Vaizey)]

It is a pleasure to serve under your chairmanship, Mr Robertson. I thank the hon. Member for Mitcham and Morden (Siobhain McDonagh) for bringing this issue to my attention and the attention of the House. Today is not a good day for EE or Vodafone. I will not mention Orange, because it was swallowed up by EE. I am sorry to hear about the huge amount of time that she has had to spend on these constituency cases, and I am very sorry to hear what her constituents have gone through. She put her case incredibly forcefully, and Anne Robinson should be looking over her shoulder in case her job is under threat from the hon. Lady. As a consumer champion and a constituents’ champion, she is second to none.

It is disappointing to hear of occasions when our constituents receive poor service from organisations. I believe—as, I am sure, does the hon. Lady—that providing excellent customer service is one of the hallmarks of an effective, efficient and competitive company. Goodness knows the amount of hours that we spend in this day and age listening to those terrible recorded automated voices when we yearn to speak to someone with a real voice giving us a common-sense answer to our problems. I cannot believe that most companies do not realise how important that is.

Be that as it may, we are talking specifically about mobile phone companies, what the experiences of the hon. Lady’s constituents say about how such companies deal with their customers, and the vulnerability of customers when things go wrong. Obviously I cannot comment on the specific details of the cases that she talked about, although I am familiar with the outline from her speech and from her briefing to my Department. I hope that she takes this in the spirit in which it is intended, but neither my Department nor the independent regulator, Ofcom, has the remit to investigate and resolve individual complaints. As she pointed out, the mobile network operator EE, which is involved in the dispute with her constituent, has—clearly because of this debate—written to her to confirm that it has withdrawn her constituent’s debt entirely and cancelled any debt recovery action.

The debate gives us an opportunity to discuss general points, as the hon. Lady indicated at the end of her speech. I will make some general points on when someone is sold the wrong contract or when contract terms are not clear, what happens when a customer complains to a mobile network operator, and Ofcom’s role in all this. I have made it clear that it is not within Ofcom’s remit to take up individual complaints about poor service from MNOs. Ofcom monitors complaint volumes, publishes quarterly statistics reports to compare and contrast the customer service of different MNOs, and takes action to enforce its complaints handling rules where necessary. Publishing complaints data is a key part of the work to provide useful comparative information for consumers and to drive improvements in the quality of service.

I am pleased to tell the hon. Lady that Ofcom is talking to mobile network providers, including the three major ones—EE, O2 and Vodafone—to understand in more detail how their customer service practices work, and I hope that that will result in improvements across the board in the standards of customer service. Already she has made progress, not just on behalf of her constituent, but on behalf of many others.

All communications providers must be members of an Ofcom-approved alternative dispute resolution scheme. There are two schemes, and providers must make it clear that customers have recourse to those schemes if they need them. Providers must, however, also make it straightforward for their customers to make and escalate a complaint with a mobile network operating company. Companies must have in place and follow complaints procedures that they publicise in their written and online material. If a customer makes a complaint that is unresolved eight weeks after they first make it, or if there has been deadlock and the provider has said that it will not do anything further about the complaint, it can be referred to the ADR scheme to which the provider belongs. I would expect every MNO to resolve complaints in a speedy and prompt fashion, and I am happy to put that on the record.

Alternative dispute resolution is a powerful piece of consumer protection that works. Figures show that it often works for the consumer’s benefit. It allows customers to take unresolved complaints to an independent body to reach an impartial judgement. The provider has to accept this decision, although the customer does not. It is still open to a customer who believes they have been dealt with wrongly by a service provider to take legal action to seek compensation. ADR does not close off that route, should they choose to use it. Legal action is for many consumers very much a last resort, and often it is difficult for them to follow that path. There is also a mechanism by which a customer who is not satisfied with how a case has been conducted by the ADR ombudsman can have the process by which the ombudsman reached their findings examined independently. Ofcom monitors evidence of compliance with complaints handling rules, and takes enforcement action where necessary to ensure that providers are dealing with customer complaints appropriately and fairly.

I want to cover the mis-selling of services, which is when a customer thinks they have signed a contract for one thing and the MNO claims they have signed up for something else. In 2009, Ofcom introduced a range of measures to combat the mis-selling of mobile services, which included clear requirements about obtaining the consumer’s permission and consent, and specifying the type of information that must be made available at the point of sale. Ofcom monitors and enforces compliance with the rules. That has led to positive results, with an initial sharp reduction in complaint numbers to Ofcom from an average of 600 complaints a month to just over 100 a month. That is still far too many, but the reduction has been sustained ever since the rules were introduced.

Ofcom’s rules on contracts are addressed under general condition 9 of the general conditions of entitlement, which is a regime of rules under which telecoms companies must operate in the UK. It is important for companies to have contracts: they offer certainty about revenue streams and allow companies to offer better value to customers. However, customers must be completely clear from the start of their contracts what terms they are signing up to, and that includes price rises, the minimum length of their commitment to the contract and how they can switch providers, if that is what they want to do. General condition 9.6 provides consumer protection in case the contract is varied while it is running. Under that condition, the telecoms provider must tell the customer that it is changing the contract—normally, that is a price rise—because it is likely to cause material detriment. It must give the customer the right to leave the contract without any penalty in response.

In general, it is Ofcom’s role to ensure that the telecoms market and services work well for citizens and consumers. Looking at the more optimistic side of the picture, competition is delivering a wide choice of competitive tariffs in communications markets. Ofcom works to ensure that consumers are able to take advantage of competition and choice, for example by ensuring that they have clear and accurate information to compare services and can switch providers easily when they want to. Ofcom continues to monitor the market, including compliance with regulatory obligations, price trends and complaints handling. It remains focused on ensuring that consumers can exercise choice to access the best deals.

I was horrified to hear what happened to the hon. Lady’s constituent who was referred to a debt recovery firm. Any reference to a debt collection agency is worrying. When a consumer disputes a bill, having the outstanding amount referred to debt collectors can be extremely upsetting. A service provider, like any other company, is of course entitled to go after money that it thinks is owed, but we would expect it to take the dispute into consideration before taking any action. If someone finds that they have been referred to a debt collection agency during a dispute with a mobile network operator, it is important that they continue to follow the complaints procedure, but they should also contact the agency straight away to explain what has happened. That may allow more time for the dispute to be resolved before further action is taken.

The Steering Committee on Reciprocity, with input from the Information Commissioner’s Office, has issued technical guidance to creditors on the conditions under which information about defaults is filed with credit reference agencies. The ICO advises lenders not to file defaults until the consumer has been in arrears for at least three months. The guidance also states that the customer should be given notice of an intention to file a default through a final demand letter. It seems that that was not the case for the hon. Lady’s constituent, which is pretty poor. Customers should also be given a relevant account statement, which should make clear not only the intention to file, but the date of the intended default. The date should allow the customer enough time to respond properly. If the customer fully meets the terms set out in a notice of intention to file a default, the lender should not file the default. Debt collectors must be licensed by the Financial Conduct Authority, a condition of which is that they must obey the FCA’s guidance. Citizens Advice can also advise on problems with debt collectors.

When dealing with large organisations, which may have hundreds of thousands or millions of customers, things may go wrong on occasion. We all live in the real world and will adopt a common-sense approach. I completely agree with the hon. Lady’s bringing the matter to the attention of the House, because what differentiates good companies from those that merely do their job is whether they can deal with mistakes to the satisfaction of their customers. It is appalling that a mobile phone company’s customer should have to turn to their Member of Parliament to resolve a dispute. It is essential for customer growth and prosperity that they retain and grow the good will of consumers.

I understand that EE has resolved its dispute with the hon. Lady’s constituent, but I am pleased to tell her that EE has informed my officials that it is reviewing its internal procedures, unilaterally, to see what lessons can be learned from her constituent’s recent complaint. We do not have any plans to legislate in this area.

[Siobhain McDonagh]

I thank the Minister for his generous response. The debt has now been cancelled and the default notice on my constituent’s credit file may have been removed, but its history is still present and it continues to prevent him from taking out the loan that he needs. I do not know whether the loan is for a business or a home, but even though the matter is now over for EE it is not over for him.

[Mr Vaizey]

The hon. Lady makes a good case. Many hon. Members have experience of constituents having a black mark, as it were, against their credit rating, which, for example, could be due to their bank not putting through a direct debit, so we need to consider the issue to ensure that the hon. Lady’s constituent’s credit rating is restored to its full capacity. I will personally intervene with EE to ensure that it puts its best people on the case and liaises with the hon. Lady’s constituent to make certain that every effort is made to show that he did not bring this debt upon himself and that this black mark is not down to his own actions.

In conclusion, the hon. Lady began her remarks by saying that this is a big day for the mobile operators. We are indeed consulting on whether to introduce national roaming. We have a good system of mobile networks in this country. We have good coverage and are introducing 4G coverage at the fastest rate in the world with the fastest take-up in the world. We have a competitive, keenly priced environment, with people quickly adopting new technology through mobile operators. There are key issues, however, that mobile operators must continue to address. One is customer service and the other is coverage, particularly in rural areas. I look forward to discussing such issues with them. I thank the hon. Lady once again for bringing the matter to the House’s attention.