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Vodafone hit with record £4.6M fine for pocketing customer payments

UK telecoms watchdog Ofcom issues its biggest ever fine after Vodafone took customers' money and failed to credit their accounts.

British telecoms giant Vodafone has been slapped with a record fine by regulators.

Justin Tallis/AFP/Getty Images

The UK's telecoms watchdog has issued its largest ever fine, after Vodafone was rumbled taking customers' money and failing to credit payment to their account.

Telecoms regulator Ofcom today levied a fine of £4.6 million against Vodafone for trousering payments without crediting customers, and for subsequent failures in dealing with customer complaints. Vodafone, one of the UK's major mobile carriers, has 20 days to pay up.

Two investigations were launched by Ofcom in June 2015. The first investigation concluded that Vodafone failed to add credit to the accounts of 10,452 pay-as-you-go customers who paid to top up their phones between December 2013 and April 2015. At £3.7 million, that makes up the bulk of the fine.

Vodafone has refunded or re-credited all but 30 of those affected, who apparently can't be found. Vodafone has made a donation to charity to cover those missing customers. The average refund per customer was £14.35.

Vodafone blames the errors on a switch to a new back-end system that consolidated the details of 28.5 million customers from seven billing databases into one new system. The network describes the change-over, which began in 2013, as the biggest IT project undertaken by Vodafone anywhere in the world.

The second investigation found that Vodafone failed to handle customer complaints in accordance with Ofcom's rules.

One of the problems uncovered is that Vodafone failed to tell disgruntled customers in writing that they could contact an independent party to resolve their complaint. If you have a problem with your network and the network isn't dealing with the issue to your satisfaction, the telecoms sector is served by two ombudsmen, Ombudsman Services: Communications, and the Communications and Internet Services Adjudication Scheme (CISAS).

"Access to an ombudsman is of huge importance," said Richard Neudegg, regulation expert at uSwitch.com. "However, the telecoms market's complaints procedure is more confusing than other regulated sectors. There isn't one single ombudsman, so it's extremely important that information on how to access these two is completely clear."

'Still the Wild West'

Industry observer Dan Howdle from comparison site Cable.co.uk believes Vodafone's problems are symptomatic of the state of the telecoms market, which has been shaken up by massive mergers. "It's still the Wild West out there," he said. "Virtual network operators migrating across networks, leaving a trail of disgruntled customers in their wake. Post Office Mobile and 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 believes the unprecedented fine is a warning shot from Ofcom. "The message is clear to all: preventative measures should be taken, or suffer the consequences. Fines of this size are the shape of things to come."