MILLIONS of mobile customers could be in line for payouts of up to £1,823 each if a bold new legal claim succeeds.
Up to five million phone users were hit with a so-called “loyalty penalty” and ripped off by more than £3billion across 28million mobile contracts, according to the man behind the class action.
Mobile and broadband customers are being warned they are throwing away hundreds of pounds a year through loyalty traps
Major mobile networks kept charging customers for handsets they had already paid off and gave cheaper deals to newcomers, the former Citizens Advice executive and consumer champion Justin Gutmann is claiming.
But the case could take years to unfold and customers might not get a penny if it fails.
In the meantime you could be throwing away hundreds of pounds a year through this and other loyalty traps.
Here Laura Purkess and James Flanders explain how to break free from unnecessary fees and save £1,454 a year.
MOBILE – SAVE £335
Many phone users stay on the same high contracts despite paying the handset offGetty
STICKING with a mobile provider when you’ve paid off your handset could cost £335 a year, according to comparison site Uswitch.
Find out whether you’re free to leave or if there’s an exit fee to pay by texting INFO to 85075.
Then, if your current phone still works fine, use the cheap mobile deal finder on MoneySavingExpert (MSE) to pick a better tariff.
Lebara has a sim-only deal at £1.99 per month for the first six months, rising to £4.99 thereafter. You get unlimited minutes and texts, plus 5GB of data a month.
Or if you do need a handset you can also find the best price for new or refurbished phones at MSE.
BROADBAND – SAVE £227
BROADBAND customers who don’t shop around are spending up to £227 more than necessary, comparison site Broadband Genie found.
Providers tempt customers to sign up with seemingly cheap deals but after the minimum contract — normally 12 or 24 months — your bills will jump.
Use sites like Broadband Genie, MoneySuperMarket or Uswitch to find a better deal. Be sure to check speed and download limits.
Four million people on Universal Credit and other benefits could qualify for cheaper social broadband tariffs, but are missing out.
Costs start at just £12 a month but only around 220,000 are signed up for these savings, says Ofcom.
Drivers who take the easy option to stick with the same car insurance provider are often overpayingGetty
CAR COVER – SAVE £516
DESPITE a clampdown by the regulator on insurers charging loyal customers more than new ones, many drivers are still overpaying.
That’s because the rules state that insurers only need to match prices for new and existing customers if they were to search for a quote at the exact same time, via the same website and had identical circumstances.
So don’t get stung by sticking with the same firm.
Use a comparison site like Compare The Market or MSE to bring down your bills. Research by Compare The Market found drivers could save £516 by switching insurers on the site. Adding an additional named driver or tweaking your job title can sometimes bring savings, so long as it’s not stretching the truth.
HOME INSURANCE – SAVE £176
HOMEOWNERS could save up to £176 a year by switching their building and contents insurance, Compare The Market found.
If you own a home with a mortgage, your lender will insist you have buildings cover to pay for repairs if disaster strikes, such as a flood or fire. If you rent, it’s down to your landlord to get this. But both tenants and homeowners should have contents insurance to protect their belongings if they are damaged or stolen.
If you need both, a joint buildings and contents policy often works out cheaper.
Millions of customers cancelled or cut back their cover in the year to May, according to the financial watchdog. In the run-up to Christmas when cold weather can cause pipes to freeze and leak, it’s more important than ever to check you’re covered.
BANK ACCOUNT – SAVE £200
IF you’ve been with the same bank for years, the chances are you’re earning pennies in interest on any cash you hold there.
But you could get a cash bonus just by moving your current account and you’ll probably get a better interest rate too.
Nationwide is offering new current account customers £200 and First Direct pays a £175 bonus.
Apply to switch to your chosen bank and all your direct debits will be automatically moved over.
‘I WAS £430 WORSE OFF BY STICKING WITH MY MOBILE PROVIDER’
CHEF and author Reshmi Bennett was an O2 customer for 22 years – but she’s recently discovered her loyalty cost her at least £430.
The former Bake Off:The Professionals contestant, from Farnham, Surrey, saved £216 a year on her mobile bills after switching from her £28-a-month tariff to one for just £10 from Smarty.
Reshmi, 40, was originally paying £34-a-month for a deal which included an iPhone 11 Pro. After the 24-month minimum term ended in 2021, her handset was fully paid off and her monthly bill dropped to around £28.
But she didn’t get around to looking at other options until this year and was shocked by how much she could save.
Had she done so as soon as her phone was repaid she would have been at least £430 better off over the two years she stayed put.
“When I rang O2 to say I was leaving as there were cheaper plans everywhere, they didn’t offer anything to make me stay,” she says. “I was surprised that they couldn’t come up with a better deal for such a long-standing customer.”
WHAT CASE MEANS FOR YOU
EXPERTS warn the recent class action suit against some of the country’s biggest mobile networks for allegedly penalising loyal customers will likely take years and could go either way.
Here James Flanders explains what the legal battle means for you…
WHAT’S THE CLAIM?
FORMER Citizens Advice executive Justin Gutmann is arguing that EE, O2, Vodafone and Three should compensate millions of customers who he believes were overcharged.
He reckons that customers who had a single contract with one provider could get up to £1,823 after legal fees – and customers who had multiple contracts could get even more.
Mr Gutmann, and law firm Charles Lyndon, are making the claim on behalf of all the customers they think have paid too much.
These are mobile users who took out bundled contracts which included a handset as well as calls, texts and data.
He alleges that these customers suffered a “loyalty penalty” because their bills didn’t reduce at the end of their minimum contract, despite the fact they had already paid for their mobiles.
Mr Gutmann believes that anyone who took one of these deals with the named firms since 2007 would be due money if the claim succeeds.
HOW DO I TAKE PART?
IT’S what is known as a class action and you don’t have to do anything right now. Everyone affected will be part of the case unless they specifically ask to opt out.
Only if Mr Gutmann were to win the claim, would customers need to come forward to claim their share of the money.
You can keep track of how the case progresses at loyaltypenaltyclaim.com, but the site warns that “disputes of this size generally take years to resolve”.
IS IT LIKELY TO SUCCEED?
CONSUMER rights expert James Daley of campaign group Fairer Finance believes it’s 50/50.
He said: “It’s hard to say whether the case will stack up from a legal perspective.
“At the end of their contract, consumers are free to switch, and although the big networks have clearly taken advantage of their customers, there has generally been a competitive market available for those who have taken the time to shop around.
“That said, if the claim is successful, we could see similar claims launched in a whole raft of sectors – from broadband to energy and savings.”
WHAT DO THE FIRMS SAY?
O2 said: “We’re proud to have been the first provider to have launched split contracts a decade ago which automatically and fully reduce customers’ bills once they’ve paid off their handset.”
The case had only recently been brought to Vodafone’s attention and it did not yet have sufficient detail for its legal team to assess.
An EE spokesperson said the firm has a “robust process for dealing with end-of-contract notifications” and added: “We strongly disagree with the speculative claim being brought against us.”
Three declined to comment.