Early termination fees of up to £240 paid out by Virgin Media customers are to be investigated by the telecoms regulator.
Virgin Media is the only major provider to charge its customers exit fees if they are forced to terminate their contract early because they move to a new home where Virgin broadband isn’t available.
Ofcom is investigating if these fees are fair and comply with the Consumer Rights Act, after receiving a number of complaints from Virgin Media customers.
Exit fees: Virgin charges a fee even if customers move to an area where it’s not available
The investigation will look into whether the penalty fees charged by Virgin Media for phone, broadband and TV contracts act as a disincentive for customers to switch providers.
It will also investigate whether the early fees comply with the rules in the Consumer Rights Act 2015 on early termination charges.
Exit fees are charged by all providers if you leave a contract early and they are required to be ‘fair and reasonable’ and to reflect the work carried out and the loss to the company of the contract ending early.
But Virgin Media works slightly differently to all of the other major providers.
It charges an early disconnection fee to customers if they end their contract early, even if the reason for ending the contract is because the customer is moving home and Virgin isn’t available in the new property.
The majority of other phone and broadband providers do not charge customers in this situation.
Virgin has its own fibre network and only properties connected to this are able to access the provider’s services. This is different to the other major providers, which all use BT’s Openreach network of cables.
Several This is Money readers have contacted us about this issue. Josh Green contacted us because he was moving house and in the new property Virgin wasn’t available so he would have to move to Sky.
This would mean technically he was ending his contract early and therefore he was facing a penalty charge of £240 from Virgin, even though it wasn’t possible for him to stay with Virgin in the new house.
Virgin told Josh the fee was listed in its terms and conditions and after we got in contact with it the fee was lowered to £190.
However, Josh was still left with a £190 fee for moving house.
Within its terms and conditions Virgin states: ‘An Early Disconnection Fee is also charged when you move to another address during a minimum period, and don’t continue with Virgin Media services for any reason. This includes if we’re unable to provide our services at your new address.’
Ofcom is investigating Virgin Media to see if the early exit fees it charges are fair
The fee charged can vary as it all depends on the package you are paying and how many months you have left on your fixed contract. Virgin told us the maximum charged is £240.
The investigation has only just been launched so it will be some time before a final ruling is made.
However, if Ofcom rules that Virgin Media has acted unfairly it could force it to change its terms and conditions and it may be the case that previous customers who have paid the early fee may be able to claim back this money.
A Virgin Media spokesperson said: ‘We note Ofcom’s investigation into early termination charges and will work with them during the course of their inquiry.’
Dan Howdle, spokesperson for Cable.co.uk, said: ‘When moving house, the difference between terminating your contract with Virgin Media and terminating your contract with other providers (who all share BT’s Openreach network) is primarily one of availability.
‘If you have a phone line – so that’s practically every house in the UK – you can get broadband of some description on Openreach (BT, Sky, TalkTalk, Plusnet, others).
Unfair fees: This is Money has heard from several readers faced with £240 early exit fees
‘Since Virgin Media’s broadband network only reaches just over half of UK households, however, there is a good chance it won’t reach you, and Virgin Media’s current policy is to charge early termination fees irrespective of whether you’re physically able to continue your services at your new address.
‘The policy is flawed. There are many reasons why a person may move house and not all are by choice, and if Virgin Media wishes to keep you as a customer the onus should be on it to provide continuity of service, not on the customer to compensate them for their loss.’
If you’re a Virgin Media customer in a similar situation and you don’t think the fee is fair – you have the right to complain directly to Virgin via its official complaints process.
You’ll then have eight weeks and if by then it has not responded, or if you’re not happy with the response, you can escalate it further to an alternative dispute resolution service which will look into your case independently.
There are different schemes depending on the company involved and for Virgin Media you will need the Communications and Internet Services Adjudication Scheme.
If it rules in your favour it could ask it to lower or abolish the fee – however there are no guarantees this will happen.