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O2 UK overcharged exiting customers by £40.7m over 7+ years: Ofcom slams senior managers, fines it £10.5m

Nearly 8 years of extra fees after it 'initially identified issues' with billing in 2011... but nothing came of it

Britain's comms regulator has dished out a £10.5m fine to O2 UK, after it found the mobile operator overcharged exiting pay monthly customers by a whopping £40.7m between 2011 and 2019.

The company didn't pot all of the £40.7m, as some of the customers it charged were already in arrears, and others simply looked at the overcharges on the bill and said “nope” as they left the firm’s loving embrace. Nevertheless, O2 gained a significant sum - £2.4m - from those who did pay up the amount they were overcharged.

O2 had initially identified issues with its billing processes in 2011 but, according to regulator Ofcom, "efforts to address these problems were not successful and customers continued to be overcharged."

The billing error came about in "four different scenarios", said Ofcom, and O2 had issued final termination bills without taking into account the money already scheduled to be taken from the customers by direct debit.

Ofcom fingered a "significant failure by O2's senior management to adequately ensure that the governance process it had put in place for fixing and remedying billing errors was followed," adding that not only had O2 failed in "some key respects in both 2011 (when O2 first identified the billing error) and 2019 (when the error was re-identified)", it had also failed to self-report.

Ofcom said that between:

At least 26 May 2011 and 15 March 2019, O2 contravened [General Condition] C3.2 and former rule [General Condition] 11.1 [s96C of the Communication Act 2003] by failing to render or make available accurate final bills to customers after their cancellation of services (i.e. termination bills) and by overcharging a significant number of customers terminating their "Pay Monthly" services with O2.

The fine imposed by Ofcom includes a 30 per cent discount from the penalty the watchdog would have otherwise have imposed because of the firm's "admissions of liability and its agreement to enter into a settlement". The money handed over by the mobile firm gets dropped into a much-depleted HM Treasury.

pupil told off, gets cross with teacher

EE, Virgin Media hit with £13.3m fine: Squeezing users for fees for early contract termination not OK


O2 is not the only UK telco that has been caught up in the overcharging-people-as-they-walk-out-the-door game. Just over two years ago, the regulator hit BT mobile offshoot EE and Virgin Media with a £13.3m penalty for taking too much dough from customers who wanted to exit their broadband or mobile phone contracts before they were due to expire.

Back in November 2019, an investigation found over a six-year period some 400,000 EE customers who prematurely called time on their contracts were billed up to £13.5m in "early-exit fees" and that, for almost a year, Virgin Media imposed early-exit charges that were higher than those on the contract.

EE and Virgin were given fines of £7m and £6.6m repsectively.

The O2 UK fine is significantly higher, with Ofcom saying its magnitude reflected the seriousness, "significant duration", "significant degree of actual and potential harm caused"; its scale and scope; and the significant absence of effective governance processes.

Of the £40.7m charged incorrectly:

  • about 85,200 customers were overcharged c.£35,930,000 but had been disconnected by O2 for non-payment of bills (and didn't pay)
  • c.26,500 customers were overcharged c.£2,320,000 but did not pay those charges;
  • 140,000 customers paid c.£2,410,000 in overcharges.

The mobile firm is the UK offshoot of megabucks multinational Telefónica Group, which netted €48.4bn in revenues for its last reported financials, for fy2019 – €7.1bn of which came from its UK arm.

Ofcom said O2 UK has refunded the customers affected for the extra charges they paid, plus an additional 4 per cent and has also changed its billing processes to prevent this issue from happening again.

It also noted that the firm had committed to make a donation to charity for the equivalent amount of cash it overcharged customers that O2 "has not been able to reach". It's not known how many of the customers this is, or whether they simply decided never to open the envelope marked "O2".

For the 2019 overbilling by EE, the BT offshoot only managed to refund £2.7m of the £4.3m it estimated it overcharged its discount clients, which means £1.6m could not be returned. That went in the charity box, which is no bad thing, but presumably users of the discount option could have used the readies.

Gaucho Rasmussen, Ofcom’s enforcement director, said of today's fine: "Mobile customers trust their provider to bill them correctly and fix any errors as quickly as possible. But these billing issues continued for a number of years without sufficient action from O2, and thousands of customers were overcharged as a result. This a serious breach of our rules."

A separate probe into O2’s compliance with the regulator's section 135 statutory information requests remains ongoing.

O2 UK spokesperson told The Reg it had remedied its billing processes, adding: "As the operator proactively driving over £168m value back to our customers in the last year alone, we are disappointed by this technical error and sincerely apologise to customers impacted.

"As Ofcom have stated today, the vast majority of funds reported were not overpaid. Only 6 per cent - £2.4m - relates to money that was overpaid by customers.

"We identified the issue ourselves and notified our industry billing auditor. We have also taken proactive steps to refund all impacted customers for the extra charges they paid, plus an additional 4 per cent." ®


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