November 22nd 2023
Shell Energy fined £1.4m
Regulator Ofcom imposes large fine for failure to alert 70,000 phone and broadband customers to ending contracts and better deals
An investigation by communications regulator Ofcom has found that Shell Energy broke rules designed to ensure that customers get a fair deal when they sign up for services. Introduced in 2020, these rules providers of telecoms and pay-TV companies to proactively prompt their customers before the end of their existing contract, as well as to provide information that helps customers to shop around and find better deals. Providers must also remind customers if they are already outside the minimum period specified in the contract.
Photo by Hans
The rules state that companies must issue customers with an end-of-contract notification – which they can do by text, email or letter, between 10 and 40 days before the end of the minimum contract period. In addition, they must send notifications at least once a year to customers who are already outside their minimum contract period, reminding them that they are free to leave or to change deal.
Both notifications must include ‘best tariff’ information to help customers understand if they can save money by changing provider or signing up to a new deal.
Ofcom has found that that 72,837 customers were affected by Shell Energy’s failures to meet these requirements between March 2020 and June 2022. In some cases, the company did not send out end-of-contract notifications and annual best tariff notifications at all. In others, customers received notifications that included inaccurate or incomplete information, the result of manual errors and systems and process failures at Shell Energy.
Some 7,750 customers received an end-of-contract notification that contained incorrect information about the price they would pay once their minimum-term period came to an end. Of these, 6,054 customers went on to pay higher charges than originally quoted. On average, they paid £65.81 extra each, totalling £398,417.67.
That’s why this week Ofcom imposed a £1.4m penalty on the company, which must be paid to HM Treasury within four weeks. The large sum reflects that this has been a serious breach of the rules designed to protect customers.
Even so, the penalty includes a 30% discount from what Ofcom would have imposed, which is due to Shell Energy’s admission of liability and agreement to enter into Ofcom’s settlement process. The penalty would also have been higher had Shell Energy not self-reported the breach of these rules, co-operated with Ofcom’s investigation and taken steps to remedy the problem. In this, the case is a valuable lesson for other service providers.
Shell Energy was quick to offer refunds to affected customers and those refunds have now been completed. Rather than offer small amounts less than £3 to former customers, the company donated an equivalent sum to charity, adding in any money from unclaimed refunds.
Suzanne Cater, Enforcement Director at Ofcom, says: ‘Every day tens of thousands of customers come to the end of their phone or broadband contract and can make significant savings by switching provider or signing up to a better deal. That’s why our rules, which demand that providers prompt customers with the information they need to take action, are so important.
‘Shell Energy’s failings represent a serious breach of our consumer protection rules and they must now pay the price. This sends a message to the whole industry that we won’t hesitate to step in on behalf of customers if they don’t play by the book.’
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