BT to cut phone contract cancellation costs

By Elliot Wright, 22nd June 2010

Phone giants BT, Virgin and TalkTalk are to slash early cancellation charges on their landline contracts.

The firms have been ordered to cut their cancellation charges by up to 85% by Ofcom after an 18 month investigation by the telecoms regulator.

Presently, customers wanting to end their landline contracts early face a hefty charge of up to £33. Under the new proposals they will pay as little as £2.

Ofcom argued that early cancellation charges were unfair as providers failed to pass on the savings they'd make from no longer having to supply their service to a household.

Despite BT saying they were legally entitled to recoup money lost out on contracts, they have agreed to an industry-wide reduction in the charges.

BT plans to reduce its early termination fees in October to between £5 and £2, down from between £8 and £7.50.

TalkTalk has already cut its costs from between £33.48 and £14.44 to between £5 and £2.

While Virgin also plans to cut its fees in October, customers will now pay between £8.35 and £4 down from between £29.99 and £11.99.

Ofcom said: "We very much welcome the reductions made by BT, TalkTalk and Virgin Media which mean that consumers will face much lower charges if they wish to end their contracts early."

Ofcom also said it expects other landline phone providers to follow suit in cutting early cancellation fees and will consider taking formal action against those that fail to.

Consumer watchdog Consumer Focus welcomed the cuts.

"The scale of these reductions shows how badly landline providers have been overcharging people up until now," it said.

"It is still best if people avoid early termination fees altogether so phone companies must make sure consumers know exactly what they are signing up for in the first place."