Mobile phones: Firms face £3bn legal claim for overcharging

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By Sam Gruet

Business reporter, BBC News

Millions of UK consumers could receive payouts after a legal claim was launched against mobile phone networks.

Justin Gutmann, a former executive at Citizens Advice, alleges Vodafone, EE, Three and O2 overcharged customers for phones beyond the end of their contract. 

He is seeking damages of more than £3bn on behalf of 4.8 million people.

Responding, EE called the claim “speculative”, while O2 said it hadn’t been contacted.


Vodafone said it didn’t have sufficient detail for its legal team to assess, and Three declined to comment.

The “Loyalty Penalty Claim” – which is being filed with the Competition Appeal Tribunal – is being brought on behalf of consumers who bought contracts made up of a mobile phone and services like data, call minutes, and texts.

Mr Gutmann estimates that 28.2 million UK mobile phone contracts could be affected from 2007.

If the claim is successful, someone who had contracts with just one of the mobile operators could get more than £1,800, he estimated.

Mr Gutmann said when the contracts were initially agreed, the cost of repayment during the minimum term of the contract – which is typically 24 months – included both the cost of the mobile and the use of services.

He alleged that the UK’s four biggest network operators and their parent companies did not reduce the amount they charged customers once their minimum contract term ended – despite the fact that consumers had already paid for their mobile handsets.

This meant existing customers were charged for something they had already paid for, and that they were charged more than a new customer on, for example, a Sim-only deal, he added.

“If our claim is successful, it will finally stop these firms from taking advantage of their loyal customers and stop the immoral practice of loyalty penalties,” Mr Gutmann said.

It is an opt-out claim, which means qualifying consumers would be automatically included for free unless they follow specific steps to opt out, according to Mr Gutmann.

But the claim could take several years to go to court. Mr Gutmann is currently seeking certification – a step needed before the claim goes to trial.

“It may be a year or two,” he said.

A spokesperson for EE said: “We strongly disagree with the speculative claim being brought against us.

“EE offers a range of tariffs and a robust process for dealing with end of contract notifications.”

Vodafone told the BBC: “This has just been brought to our attention and we don’t yet have sufficient detail for our legal team to assess.”

An O2 spokesperson said that to date “there has been no contact with our legal team on this claim”.

“However, we are proud to have been the first provider to have launched split contracts a decade ago which automatically and fully reduce customers’ bills once they’ve paid off their handset,” the spokesperson added.

The firm said it had been campaigning on this issue since May and has called on other operators to introduce changes that would prevent consumers overpaying for smartphones they already own.

Jack Drury, 27, from St Albans, says he paid a tariff covering the cost of his device and airtime three years after he’d paid off the handset debt

It’s something Jack Drury, 27, from St Albans, experienced earlier this year.

He told the BBC he was “delighted” with the claim.

“For many of us, a monthly fee is the most affordable way of accessing tech. But it should be clear what proportion of that fee is repaying a device, and what is paying for the mobile services,” he said.