£3.3 Billion lawsuit targets UK mobile giants

The UK’s major mobile phone companies are facing a £3.3 billion class action lawsuit. This includes including BT-owned EE, Vodafone, Three, and O2. This comes over allegations of imposing “loyalty penalties” on long-standing customers. Campaigner Justin Gutmann and law firm Charles Lyndon lead the lawsuit, alleging that these companies overcharge customers by retaining payments for handsets in bills even after customers have paid them off at the end of the initial contract.

The legal action comes amid growing concerns over telecoms pricing during a broader cost of living crisis. Regulator Ofcom has been investigating mobile and broadband operators. Consumer advocates worry that a proposed Vodafone and Three merger could reduce competition in pricing. The lawsuit, alleging that loyalty penalties affected around 5 million consumers across more than 28 million contracts, asserts that each overcharged contract could be worth up to £1,800.

Citizens Advice previously raised the issue of loyalty penalties in a 2018 “super complaint.” This led to voluntary commitments by most mobile operators. Despite regulatory efforts, the lawsuit claims that the practice has persisted, affecting millions of customers.

The 2020 update from the Competition and Markets Authority emphasised that providers should refrain from charging consumers the same rate once they have paid off their handsets. Ofcom introduced rules the same year requiring operators to notify customers when contracts end and offering better deals. However, Citizens Advice research from the previous year estimated that about one in seven consumers may still be paying loyalty penalties.

The opt-out class action includes customers who made payments after their contractual minimum term expired. It is estimated that consumers have been overcharged £3.28 billion since 2007. O2, one of the defendants, emphasised its efforts to end the “smartphone swindle” by automatically reducing bills once handsets are paid off.

This class action adds to the challenges facing the UK’s telecoms sector, with BT separately entangled in a £600 million class action over alleged landline overcharging. Telecoms companies also face criticism for implementing above-inflation mid-contract price increases, currently under investigation by the UK advertising watchdog.

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Emma Cockings Emma is a content editor for Claims Media. Emma is a experienced writer with a background in client-centric personal injury for a major firm. She has attended and reported on multiple brokerage events throughout her career.