Lo-Rate phone customers win right to claim refunds

Customers of Lo-Rate Telecom may be entitled to claim refunds of hundreds of pounds after regulators this week found the company guilty of illegal sales practices.

Ofcom, the telecoms regulator, fined the company 10 per cent of its turnover and ordered it to inform past and present customers they may be entitled to claim back penalty charges they were forced to pay. Customers will also be entitled to cancel their contracts.

The case is the first fine handed down by Ofcom in the battle against "slamming". Lo-Rate Telecom is one of several small telecoms operators accused of employing sharp practices in order to persuade customers to switch home phone provider.

Ofcom said Lo-Rate had deliberately misrepresented its relationship with BT in order to persuade people to switch and had also failed to explain its minimum contract terms. Many customers who subsequently tried to cancel their contracts with Lo-Rate were threatened with disconnection unless they paid a £395 penalty fee.

Ofcom has previously been accused of failing to take tough action against unfair practices employed by telecoms providers. But this week's fine is the maximum penalty the regulator is allowed to levy.

A spokesman said: "This decision reflects the serious nature of the contravention. At least one member of senior management was actively involved in the promotion of mis-selling activity by sales staff."

A spokesman for BT, which has been receiving 17,000 complaints a month from customers who believe rivals have been trying to mis-sell to them, said: "It's good to see firm action being taken - hopefully this will deter other operators tempted to pull the wool over customers' eyes."