Ofcom has fined TalkTalk the largest amount ever for a British telecoms provider after it continued to charge thousands of customers who had cancelled its service.
The watchdog yesterday announced it had fined TalkTalk and its subsidiary Tiscali UK a total of £3m "for breaching consumer rules".
Dido Harding, the chief executive of TalkTalk, said in response that she was "disappointed" at the scale of the fine, adding she felt it was a "disproportionate penalty".
Months earlier, the company had agreed to pay out £2.5m to customers affected, blaming its billing systems. The problems arose after TalkTalk bought Tiscali in 2009 and attempted to move customers over to one platform.
The company claimed to have largely resolved the issues, but Ofcom received a further 3,000 complaints from angry consumers who had been charged for services despite closing their accounts. Morten Singleton, an analyst at Investec, said: "It is a sizeable fine, which speaks volumes about Ofcom's view of how seriously it takes the issue."
Yet the regulator did not impose the maximum penalty at its disposal, namely 10 per cent of the company'sturnover. Mr Singleton said: "It was mitigated by how TalkTalk reacted after it had a real problem getting customers over from one billing system to another." The fine is about 0.2 per cent of its most recent full-year turnover.
Ms Harding said she was pleased that Ofcom had recognised the "significant steps we've taken to solve this problem and has acknowledged that the issues surrounding the integration of the Tiscali business in 2010 are behind us." She added that in the past three months the regulator had received just two complaints a week related to the issue.
Ofcom opened its investigation into TalkTalk in July last year after receiving 1,000 complaints, warning the group that it faced a financial penalty if it continued to bill customers who had cancelled services.
At the time, the regulator's head of consumer affairs warned the company that its actions were "unacceptable, which is why we have ordered them to clean up their act or face the consequences".
TalkTalk then revealed it had identified 62,000 affected customers and paid £2.5m in refunds and goodwill payments but that its systems had continued to cause problems.
A spokeswoman for Ofcom said the investigation was now closed, although she added that the regulator would continue to monitor the company's progress.
The difficulties meant the company was named the most complained-about broadband and landline telecoms provider in a report drawn up by Ofcom earlier this year.
The data, which covered October last year to February showed 1.7 complaints per 1,000 customers. Among its rivals BT received 0.3 complaints per thousand, BSkyB had 0.4, and Virgin 0.2.