BT: court action for bill charges?
Updated on 19 March 2008
BT is facing court action over the charges it imposes on customers who don't pay by direct debit.
The case will examine whether it's fair that customers who pay bills by cheque or cash are charged an extra £18 a year.
BT insists that it is fair and is less than some competitors charge.
But if the company loses the court case it could also lose around £100m a year in revenue and may have to give refunds to its customers.
The battle is on to force BT to change the way it charges its customers. Solicitor Ros Fernihough is leading the consumer fight back against what she believes is a rip off of customers who won't or can't pay their bills by direct debit.
Ros Fernihough said: "As soon BT wrote to me as a customer, saying I had to pay £4.50 I wrote back saying I'm not paying £4.50 and I'm not paying by direct debit. Please refund my money or I'll sue you."
Almost half, 43 per cent, of BT's 13m customers don't use direct debit, preferring to pay by cheque, cash or electronic transfer. That means they're charged £4.50 extra per quarter on their bill, or £18 a year, generating annual revenues for the company of around £100m.
BT isn't the only company that does this - Virgin Media for example, charges £60 a year.
"It's going to be harder for Ros to do it on her own, than for Ofcom."Jeremy Marshall, a contracts lawyer
The communications industry watchdog Ofcom has proposed new guidelines on so called "additional charges" which are now under consultation.
These state that companies should be clear and upfront about charges which must be "demonstrably fair" and they can only cover the cost of collecting payments.
They must not be "an opportunity to collect further revenue". Ofcom will publish final guidelines this autumn.
But that's not soon enough for Ros Fernihough, who will take on BT later this month in the small claims court, arguing that the charges are unfair, according to regulations governing consumer contracts.
Ros Fernihough added: "Now, if BT wants to charge people for collecting the money, i.e. 15p for an electronic transaction, 25p for a cheque, fine, nobody would dispute that. But what about the profit they're making? We're not here to help shareholders, we're not here to subsidise bad debtors. It cannot be right, for the old and the sick; somebody has to stand up for those people."
BT refused our request for an interview, but in a statement insisted:
"BT maintains a differential because it costs us more to process non-direct debit payments. It's important for us to keep an eye on costs as we face fierce competition from large companies including Sky, Tesco, Virgin, Tiscali etc, many of whom are able to cross-subsidise their phone services whereas we're prohibited from doing so."
And some consumer champions point out that imposing a charge on customers isn't itself a problem.
Ceri Stanaway from Which? said:
"In principle, charging for non-direct debit payments isn't unfair, but the amount needs to be fair. They shouldn't be making money out of it."
Legal opinion is also divided on the merits of the case.
Jeremy Marshall, a contracts lawyer said:
"David and Goliaths are all very well, but we know that Davids have a lot of difficulties along the way and whether they'll have that stone remains to be seen, but it's going to be harder for Ros to do it on her own, than for Ofcom."
Ros Fernihough is pressing on with her campaign, but it will be up to a judge to decide the outcome. The case goes to court on 28 March.
