Ofcom threatens court action over telecoms mis-selling

This is the latest development in the scandal of "slamming" in the telecoms industry. BT claims to receive 21,000 complaints a month from consumers who believe they have been misled into signing up for services from rival telecoms providers.

Ofcom said Freecall and Orb had broken a number of consumer protection regulations, including failing to warn customers they were entitled to cancel contracts within seven days, and demanding payments for services supplied to consumers that they had not agreed to.

Ofcom also warmed Freecall had made statements to potential customers that might have wrongly suggested the company was part of BT, or authorised to act on its behalf.

BT recently fought a number of legal actions over similar allegations, amid concern that rivals have been attempting to poach its customers by suggesting they are working with BT.

Although Ofcom is keen to see more competition between phone services suppliers, it is concerned that rogue salesmen are trying to win business by using misleading tactics. The problem mirrors a similar scandal which followed the opening up of the gas and electricity markets.

The regulator said: "This investigation is part of a sequence of investigations into misconduct by individual communications providers. They form part of a wider campaign that includes the active enforcement programme to monitor compliance with new regulations designed to prevent mis-selling in fixed-line telecoms and protect consumers from abuses such as slamming."

BT said: "Up to 21,000 customers a month are complaining to us about sharp selling practices yet no company admits to wrongdoing. We hope actions like this will send a strong message."

Freecall and Orb have until 9 November to sign the Ofcom undertakings, or face a court battle over with the regulator.