Telephone contract penalties slashed

Penalties for phone users who leave their landline contract early are to be slashed, Ofcom announced.

The fees will be cut by up to 85 per cent to reflect the costs providers save by no longer supplying the service, the communications regulator said.

Cheaper "early termination charges" will also apply to landline customers who receive broadband in the same package.

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Ofcom said regulations meant consumers who ended contracts early should never have to pay more than the payments remaining, and should often pay less to reflect the savings to the provider.

Yesterday's announcement follows an 18-month review by Ofcom to check BT, TalkTalk and Virgin Media were complying with the regulations.

The three providers did not believe their charges were unfair but had agreed to significantly reduce those applying to landline services, Ofcom said.

Under the agreement BT's early termination charge on its evening and weekend deal will drop from 7.50 to 2.50, down from 14.53 before Ofcom announced it was looking into the fees in December 2008.

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TalkTalk's early termination charge for its evening and weekend package has already dropped from 14.44 to 3, and Virgin Media's fee on an equivalent package will fall from 11.99 to 4.

Virgin Media and BT will introduce the new charges in October, Ofcom said.

It expected other landline providers to reduce their charges to similar levels.

A BT spokeswoman said BT's early termination charges were not unfair but after discussions with Ofcom, it agreed to reduce those charges to help Ofcom to reach industry-wide agreement.

"We feel that Ofcom should now be turning its attention to the pay TV and mobile markets to ensure that consumers pay consistent early termination charges for all their communications services."