Giffgaff has been fined £1.4 million by Ofcom for overcharging customers to the tune of almost £2.9 million due to an issue with its billing system.
The Telefonica-owned Mobile Virtual Network Operator (MVNO) uses O2’s network to deliver services to users and bills itself as a ‘no-frills’ option with a community-based approach to customer services.
Customers have the option of purchasing bundles of minutes, texts and data called ‘goody bags’ either by paying up front or adding them later using pay-as-you-go credit.
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However, an Ofcom investigation found that customers who paid for goody bags using credit did not have the bundles applied to their account immediately. In some cases, the bundle was only activated once a call was finished or when a device was switched on or off.
This mean that voice calls were paid for using credit rather than the inclusive minutes that comprise a bundle.
Ofcom said that the bundles should have applied immediately from the moment of purchase and customers were effectively being charged twice for the same call. As many as 2.6 million customers were affected by the issue.
“Getting bills right is a basic duty for every phone company. But Giffgaff made unacceptable mistakes, leaving millions of customers out of pocket,” said Gaucho Rasmussen, Ofcom's Director of Investigations and Enforcement.
“This fine should serve as a warning to all communications providers: if they get bills wrong, we’ll step in to protect customers.”
The penalty includes a 30 per cent discount on account of the fact that Giffgaff proactively reported the issue to Ofcom and has worked to return £2.1 million to customers. The remaining sum has been donated to charity, however anyone who believes they have been affected can still contact the company for a refund.
“Giffgaff deserves credit for reporting the mistake to industry watchdog Ofcom and acting quickly to refund 2.1 million customers,” said Ernest Doku, mobiles expert at uSwitch. “But the fact that almost half a million consumers are still out of pocket is disappointing.
“The size of Giffgaff’s fine represents how seriously the watchdog takes this error. And providers be warned: mobile phone users will be quick to vote with their feet if they believe they are being treated unfairly.”
Giffgaff CEO Ash Schofield has apologised to customers: " As a business, we have already begun - and will be fully - implementing the recommendations within Ofcom’s final decision.
"While Ofcom was conducting their investigation, we made the decision to set aside some funds from our 2018 profits to use in case of a fine. Because of that, we’re able to make sure that this cost will not be passed onto you and it won’t affect the cost of goodybags and/or credit.
"On behalf of everyone at giffgaff, I’d like to apologise again to all those members affected by this and thank you for your ongoing support."
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Steve McCaskill is TechRadar Pro's resident mobile industry expert, covering all aspects of the UK and global news, from operators to service providers and everything in between. He is a former editor of Silicon UK and journalist with over a decade's experience in the technology industry, writing about technology, in particular, telecoms, mobile and sports tech, sports, video games and media.