Ofcom to ban automatically renewing contracts

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Ofcom say the contracts are unfair for customers

CONTRACTS which automatically renew unless the customer opts out are to be banned by watchdog Ofcom.

Currently telephone and broadband companies which operate “Automatically Renewable Contracts” (ARCs) are able to tie their customers into new minimum contract periods and penalise them for leaving.

But as of December the practice is to be outlawed.

Ofcom Ofcom Chief Executive, Ed Richards, said the contracts helped prevent competition.

He said: “Ofcom’s evidence shows that ARCs raise barriers to effective competition by locking customers into long term deals with little additional benefit.

“Our concern about the effect of ARCs and other ‘lock in’ mechanisms led to our decision to ban them in the communications sector.”

Its estimated that 15% of UK consumers are tied into such contracts, which are offered by companies such as BT and TalkTalk Business.

The sale of new contracts will be banned from December 31, 2011 with existing contracts set to be phased out by the following year.

 

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