Unfair contracts that tie millions of landline and broadband customers into new deals on expiry, unless they opt out, will be banned.
Telecoms regulator Ofcom today announced the sale of these new 'rollover' contracts will be outlawed from 31 December this year.
- Deals that tie you into another on expiry banned from December
- 15% of residential customers are on rollover contracts
- BT is largest rollover contract provider
But consumers still need to be on their guard as providers have been given until 31 December 2012 to switch consumers on rollover contracts to fairer deals, which leaves plenty of time to grab more cash from their customers.
Rollover contracts are unfair as they lock users into a new minimum term on expiry, with penalties for leaving, unless the customer actively opts out of the renewal. This gives them less opportunity to switch to a cheaper deal.
Ofcom figures show approximately 15% of residential customers are on rollover contracts.
'Win for consumers'
BT is the largest communications provider currently offering rollover contracts, while other offenders include Adept Telecom, Axis Telecom, Eze Talk and iTalk.
TalkTalk Business, Titan Telecoms, and Optimum Calls offer them to business users.
When Ofcom first released proposals to ban rollover contracts in March, BT was "disappointed", claiming its customers were happy with the discounts offered by renewable contracts.
Ofcom chief executive Ed Richards says: "Ofcom's evidence shows rollover contracts raise barriers to effective competition by locking customers into long term deals with little additional benefit.
"Our concern about the effect of them and other 'lock in' mechanisms led to our decision to ban them in the communications sector."
Ernest Doku, technology expert at price comparison site uSwitch.com, says: "The end of rollover contracts is a win for consumers, who are too often unwittingly trapped in long-term deals and later penalised for trying to get out of them.
"Hopefully, the emphasis will be on providing the best service and support possible, so consumers actively choose to stay with providers, rather than stay with them by default."