Early termination fees and switching

Guidance last updated March 2020

Introduction

When a customer switches from one provider to another for landline and/or broadband services, Ofcom’s General Conditions (GCs) specify the information that must be included in notification letters from both the losing and gaining provider.

This information must confirm, amongst other things, the amount of any early termination fee (ETF) that is payable. These rules are not always followed. This guidance note is designed to give our member companies useful information on our approach to complaints relating to this issue.

Decision-making principle

If a losing provider fails to include the required information relating to an ETF in the notification letter, the customer is not in an informed position as to whether to continue with the switch to the new provider. If the customer is charged an ETF without being notified, we consider it unreasonable for the charge to be maintained by the losing provider.

Relevant regulation

C7.11 Where a contract is entered into with a Switching Customer for the provision of Relevant Communications Services, the letter sent by the Regulated Provider that is the Losing Provider in accordance with Condition C7.10 shall, in addition to the information listed therein, set out in clear, intelligible and neutral terms:

(a) an explanation that the transfer will automatically take effect on the Migration Date and that no contact is required with the Regulated Provider that is the Losing Provider to cancel their existing service;

(b) an explanation that after the transfer, the Switching Customer will receive a final Bill including any Early Termination Charge that is due;

(c) an explanation of the applicable Early Termination Charge as set out in the contract;

d) the means by which the Early Termination Charge must be paid:

(e) the amount of the Early Termination Charge due at the estimated Migration Date; and

(f) where applicable, the impact of the transfer on the prices of all continuing Relevant Communications Services.

C7.12 The letters under Conditions C7.9 to C7.11 must be sent in paper or another Durable Medium. Such letters must be sent by normal post, unless the Switching Customer has explicitly agreed to receive correspondence electronically, such as through verbal consent in a call or through electronic confirmation when ordering online.

Case studies

Case study 1

The losing provider sent the customer a notification letter following the customer’s request to transfer to a different provider.

The ‘leaving’ letter states: “As you are ending the contract within the minimum term you will be charged an early termination fee.”

In this case the provider has not specified the amount of the ETF. Therefore, the customer was not in an informed position to decide whether to continue with the transfer. In cases like this it is not fair for the customer to bear the cost of the termination fee when the provider has not followed the rules. In this case we would remove the ETF.

Case study 2

The losing provider sent a notification letter (losing letter) to the customer following confirmation that the service was to be transferred.

The ‘leaving’ letter states: “As you are ending the contract within the minimum term you will need to pay an early termination fee of approximately £328.96 as of 10 February 2020, due to you having 10 months and 8 days left of your minimum term contract.”

In this case the provider has specified an ETF amount and explained why it will be charging this when the contract ends. This notification is in line with the regulations and the customer is fully informed and able to decide whether to continue and pay the ETF or retain the service with the provider. We would maintain this charge as the provider has complied with the regulations.