Ofcom's verdict is a result of two separate investigations it commissioned last year- one on the network's complaint handling procedures and the other on its adherence to Ofcom's billing regulations. Vodafone was found wanting in both cases, with Ofcom discovering that while the company handled complaints poorly, it also let down 10,452 Pay As You Go customers by failing to credit their accounts after they paid to top up their credits. This resulted in customers losing as much as £150,000 collectively over the last seventeen months. According to Ofcom, Vodafone started reimbursing these customers only after the industry watchdog intervened.
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After investing Vodafone's complaints handling procedure, Ofcom found that alarmingly, Vodafone’s customer service agents didn't have a clear view on what constituted a complaint and the escalation mechanism was neither appropriate nor timely. Vodafone also failed to inform customers in writing that they had the right to get their complaints resolved via third party resolution scheme after eight weeks.
"As a result of these failings, two penalties have today been imposed against Vodafone: £3,700,000 for taking pay-as-you-go customers’ money without providing a service in return; and £925,000 for the flaws in its complaints handling processes," said Ofcom in a press release. "The penalties incorporate a 7.5% reduction to reflect Vodafone’s agreement to enter into a formal settlement, which will save public money and resources. As part of this agreement, Vodafone admits the breaches. It has also reimbursed all customers who faced financial loss, but for 30 it could not identify, and made a donation of £100,000 to charity."
Ofcom added that that all phone users deserve to be treated fairly and in good faith and that it will not hesitate to investigate and penalise those who break the rules. The watchdog, along with DCMS, backed a popular campaign led by Scottish National Party MP Drew Hendry last year to let consumers switch easily if they thought their network providers weren't offering adequate signal. Hendry campaigned for consumer rights legislation to be extended to mobile phone contracts.
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Ofcom's penalty on Vodafone has received support from several quarters, including from Dan Howdle, telecoms expert at cable.co.uk. "“This is the biggest telecoms fine Ofcom has ever levied, and rightly so. It’s still the Wild West out there: Virtual network operators migrating across networks, leaving a trail of disgruntled customers in their wake; Post Office Mobile, Sainsbury’s Mobile and others shutting down altogether; falling customer service levels, and in the case of Vodafone – the UK’s most complained about mobile provider according to Ofcom’s most recent report – failure even to provide services customers have already paid for," he said.
“While the investigation shines light on inadequate remedial systems within Vodafone, it would be foolish to assume it is alone in its inadequacies. The message is clear to all: Fines of this size are the shape of things to come, and preventative measures should be taken, or suffer the consequences,” he added.