October 19, 2011

Rollover contracts in the UK and in the EU legislation

Writing about web page http://www.ft.com/cms/s/0/3ebd2fc0-de12-11e0-a115-00144feabdc0.html#axzz1bDgMn0B2

In the United Kingdom, the Unfair Terms in Consumer Contracts Regulations 1999 in a schedule 2, is giving an indicative and non-exhaustive list of terms which may be regarded as unfair, for example:

"automatically extending a contract of fixed duration where the consumer does not indicate otherwise, when the deadline fixed for the consumer to express his desire not to extend the contract is unreasonably early."

http://www.legislation.gov.uk/uksi/1999/2083/regulation/5/made

Ofcom (Office of Communications), which is the government-approved regulatory authority for the broadcasting and telecommunications industries, banned rollover contracts in the telecoms market. But it will take a while for the ban to be implemented in full. Providers will still be able to switch people into unwanted contracts until December 31, 2012.

An article of the Financial Times of the 14th September 2011 called "Ofcom to free BT clients from rollover deals" revealed that, according to Ofcom, about a sixth of homeowners in the UK are locked into rollover contracts. Ed Richards, Ofcom chief executive said:"Ofcom's evidence shows that automatically renewable contracts raise barriers to effective competition by locking customers into long terms deals with little additional benefit."

Ofgem, which regulates gas and electricity providers, initially proposed a ban on rollover contracts, but this has been put on hold and will form part of a wider package of measures that will be put out for consultation this autumn.

After the EU legislation, uSwitch.com,the price comparison website, says that there was a jump in the cost of the cheapest deals after the new rules which means that the change has brought more flexibility for mobile users.

In May 2011, the European Union legislation banned the sale of 36-month mobile contracts and limited the maximum term to 24 month.

A directive of the 25 November 2009 amends two directives of 2002 on that topic and amend also a regulation on cooperation between national authorities responsible for the enforcement of consumer protections laws. (see http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:337:0011:0036:EN:PDF)

According to the EU legislation of May 2011, it is said that providers must also offer 12-month deals for customers who do not want to be tied in.


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