David Prosser: Time to cut off the telephone sharks

Click to follow
The Independent Online

I don't know the exact rights and wrongs of the dispute, though it seems unlikely that a company the size of Centrica would sign such an agreement unless it was concerned about the legal action with which it was being threatened (BT has already won one such action this year).

What I do know is that the market for home phone services is lucrative, especially for the salesmen employed by the large suppliers. Such staff are generally paid on commission, which must make it tempting to bend the rules to get more contracts signed.

We've been here before. In the late Nineties, when the Government deregulated the gas and electricity markets, an army of cowboy salesmen descended on the country, conning people into switching energy supplier, or simply transferring them without their knowledge. The scandal took years to clear up and undermined the original point of deregulation, to enable people to hunt down a better deal.

Now something similar is happening in the market for home phone services. BT faces hot competition from rivals, which want to break its stranglehold on the market. No doubt some of its fury about its enemies' tactics is motivated by a desire to retain its dominance. But BT says it gets 21,000 complaints a month, and an independent investigation by the regulator Ofcom earlier this year confirmed evidence of mis-selling in at least half the cases BT passed to it.

The scale of the problem is too large to be shrugged off as sour grapes - something sinister is going on. It is increasingly clear that rogue sales staff - with or without the knowledge of the companies that pay them - are using underhand tricks to persuade people to sign up to new phone suppliers.

The question is what Ofcom intends to do. It has told BT it must not phone customers who switch to rivals. The regulator says BT would simply try to persuade them to return to the fold, damaging competition. Fair enough, but the rule does mean BT can't check whether customers have made a genuine decision to leave, or been mis-sold.

I don't suppose BT is acting entirely altruistically in taking action against its rivals - this is self-preservation - but if Ofcom won't allow it to find out whether switches are kosher, the regulator itself should take a stronger line. In May, Ofcom was given powers to fine companies caught breaking the rules, but has not done so yet.

There's good news for Norwich Union policyholders who want to dump with-profits savings plans they hold with the insurer. It has cut the market value reductions (MVRs) on many of its funds. These reductions are penalties that savers must pay if they want to get at their money ahead of schedule - they reflect the fact that such plans smooth out poor market performance over several years, so those who withdraw early may get an unfair advantage.

Let's hope other insurers follow its lead. The stock market is 60 per cent higher than when it hit its low-point in 2002, so with-profits providers no longer have a justification for charging whacking MVRs, which are close to 30 per cent of your fund value in some cases.


Looking for credit card or current account deals? Search here