Regulators have slapped Vodafone with a £4.6m fine for "serious and sustained breaches of consumer protection rules" across two key investigations.
Ofcom said that the telecoms giant failed to credit over 10,000 customers' accounts after they paid top-ups on pay-as-you-go contracts. Over a 17-month period, Vodafone customers missed out on £150,000 of money that should have been credited to their accounts.
As a result the regulator fined Vodafone £3.7m "for taking pay-as-you-go customers’ money without providing a service in return".
A spokesperson for Vodafone said: "We have fully refunded or re-credited 10,422 customers out of the 10,452 affected. The average refund per customer was £14.35."
The second investigation centred on a series of Vodafone's customer services failures.
Ofcom said that "Vodafone failed to comply with our rules on handling customer complaints".
The regulator ruled that its staff "were were not given sufficiently clear guidance on what constituted a complaint" and concluded that "processes were insufficient to ensure that all complaints were appropriately escalated or dealt with in a fair, timely manner". It added:
Vodafone’s procedures also failed to ensure that customers were told, in writing, of their right to take an unresolved complaint to a third-party resolution scheme after eight weeks.
A fine of £925,000 was handed down for failings in connection with the second investigation.
The two fines levied on Vodafone include a 7.5 per cent reduction for formally accepting the charges.
Although Vodafone said it has reimbursed the pay-as-you-go customers, it was unable to identify 30 of them and paid an average of £3,333 per unknown customer to charity.
"As we cannot refund those customers and have no intention of profiting from this issue in any way, we have instead made a donation of £100,000 to a number of UK charities," a spokesperson for Vodafone said.
Lindsey Fussell, Ofcom consumer group director, said:
Vodafone’s failings were serious and unacceptable, and these fines send a clear warning to all telecoms companies.
Phone services are a vital part of people’s lives, and we expect all customers to be treated fairly and in good faith. We will not hesitate to investigate and fine those who break the rules.
Detailed Ofcom ruling:
Ofcom found that Vodafone took money from pay-as-you-go customers but provided nothing in return. This was as a result of problems that occurred when Vodafone moved customers to a new billing system.
Vodafone disconnects inactive pay-as-you-go accounts after a certain period of time and recycles the numbers, a common practice in the industry.
Where a pay-as-you-go phone has not been used or ‘topped-up’ for 270 consecutive days, Vodafone puts the customer’s SIM card into a ‘pre-disconnection state’ for up to 24 hours, before disconnecting it from its network. During this period, customers should not be able to make calls or top-up their accounts.
Vodafone had problems transferring customer accounts to the new billing system, and so stopped disconnecting inactive SIMs from its network. Consequently, they remained in a ‘pre-disconnection state’ for significantly longer than 24 hours. Customers were able to pay for top-ups at cash machines and via other electronic methods during this period, which should not have been possible.
Although receipts confirming the success of their ‘top-ups’ were issued to some of those customers, Vodafone did not credit any of the customers’ accounts, or provide them with the services they had paid for. Nor did the credit show on customers’ account balances. This practice lasted for 17 months, costing 10,452 pay-as-you-go customers in the region of £150,000. Vodafone staff failed properly to investigate and put things right.
Ofcom’s investigation concluded that Vodafone had breached General Condition 23.2(a), which prohibits the mis-selling of mobile telephone services; and General Condition 11.1, which prohibits inaccurate billing.
Complaints handling investigation
All telecoms providers must have procedures in place that follow Ofcom’s approved Code of Practice for complaints handling. The Code sets minimum standards covering the accessibility, transparency, and effectiveness of providers’ complaints handling processes.
Ofcom’s investigation found that Vodafone provided its frontline customer service staff with insufficient and ambiguous information on when to treat a customer’s call as a complaint.
Vodafone’s procedures also failed to ensure that complaints were escalated quickly enough, and that customers received written notification of their right to alternative dispute resolution (ADR) after eight weeks.
We found that Vodafone’s flaws in its complaints handling processes did not comply with our Code of Practice, and so contravened General Condition 14.4.