Unlimited credit – financial over-commitment

The TIO regularly receives and investigates complaints where complainants have been billed for a high value of telephone calls or Internet charges, and find themselves in a position of financial over-commitment.

Background

As with credit cards, telecommunications customers most often pay usage charges in arrears, i.e. after they have used telephone or Internet services.

Unlike with credit cards, telecommunications service providers do not always conduct credit checks on prospective customers, e.g. landline customers. In addition, providers do not as a rule impose any limits (or “caps”) on a customer’s “spend”, i.e. the number and type of calls that can be made from the service. An exception is some Internet Service Providers (ISP), which “throttle” access to Internet usage after users reach the download limit on their Internet plan. Some telephone service providers have a policy of restricting access to more expensive long distance or premium-rate services for new customers, as well as international mobile roaming, but generally they place the onus on consumers to limit access to certain services.

In addition, telephone handsets (especially landline telephones) or computers with an Internet connection are accessible to all members of a household, and regulating access by other individuals to such services can pose problems for lessees. (Only some telecommunications companies offer PIN access, which allows a service to be locked to those who do not know the PIN, for a charge.)

In the main, telecommunications providers effectively extend credit to their customers in circumstances where the only credit limits are those of a discretionary nature, i.e. those self-imposed by customers or by the provider from time to time, e.g. access restrictions.

The situation above means that a lessee can either:

• accrue high charges soon after they connect a service, or
  
  
• receive a bill multiple times their average monthly or quarterly account.

Whichever scenario, it is not uncommon for complainants to the TIO to claim that they have been charged more than they are capable of paying, i.e. that the charges have put them in a position of financial “over-commitment”.

Types of calls

Financial over-commitment by consumers of telephone services most often arises as a result of calls having been made to third-party services, e.g. calls to premium-rate international and 190X numbers or to premium SMS services. Currently, carriage service providers bill for a range of third-party services including premium-rate 190X services, premium SMS and services accessed via an international prefix. Users of these services incur premium-rate call charges, some component of which relates to the content or nature of the services.

For additional information about the way the TIO handles complaints about charges for calls to numbers with a 190X prefix, see the TIO’s position statements: Disputed calls to adult services and Disputed Internet dialler charges.

Financial over-commitment can also arise after a customer makes calls to ordinary long distance (national) and mobile numbers or if they exceed their Internet download limit. Alternatively, it might arise as a result of multiple local calls from a customer’s service, e.g. from a Commander-style PABX system, to a back-to-base alarm number, or from multiple unsuccessful attempts to connect to the Internet (see the TIO’s position statement: Repeat dialling to connect to the Internet).

Investigation of complaints involving unlimited credit and financial over-commitment

Where a consumer brings a complaint to the TIO about charges for telephone calls or Internet use which they claim have put them in a position of financial over-commitment, the TIO will consider investigating depending on the individual circumstances of the complaint.

In deciding whether or not to investigate, and in resolving such complaints, the TIO will consider the law, good industry practice and what is fair and reasonable in all the circumstances. In obtaining a fair and reasonable resolution to a complaint, the TIO may have regard to:

• the size of the debt
  
  
• any demonstrated financial over-commitment by the customer or hardship to the customer as a result of enforcement of the debt
  
  
• the usage and payment history of the customer
  
  
• any vulnerability on the part of the customer or user of the service
  
  
• whether the relevant call charges are the result of anomalous circumstances, e.g. a security alarm malfunction, as opposed to simply an increase in normal usage
  
  
• the existence and effectiveness of any systems or processes a provider uses to monitor the level of debt of any customer

  On this point, the TIO takes the view that it is not enough for a provider to simply have systems or processes in place to monitor the level of debt of any customer. Those systems and processes should be effective and reasonable. For example, it would be reasonable to define “high unbilled debt” in the context of the average usage of the individual customer rather than the total average spend of all residential customers.

  The TIO will not itself make a decision as to what is a reasonable credit limit that can apply in all situations and circumstances. The TIO will, however, look at whether the application of a particular limit is reasonable in individual cases.

• once the provider became aware or ought reasonably to have become aware that the customer was incurring a disproportionate amount of debt, whether the provider took steps to minimise or limit the customer’s access to credit or exposure to debt and, if so, the effectiveness of those steps
  
  
• once the provider became aware or ought reasonably to have become aware that the customer was incurring a disproportionate amount of debt, whether the provider issued any advice or warning to the customer about the level of debt and, if so, the effectiveness of that advice or warning
  
  
• the quality of any information given by the provider to its customer about ways to limit financial over-commitment on their part, e.g. exchange-based call barring. In addition, the TIO would also take into account how and when a provider had provided any such information to its customer.
  
  
• what steps a customer took, or ought reasonably have taken, to limit any financial over-commitment on their part, both before and after they became aware that they were incurring a disproportionate amount of debt
  
  
• whether a customer has agreed to use alternative products/services that may be available in the market place to obviate debt, and
  
  
• in the case of premium rate services, the nature of the service and the manner in which it was marketed or promoted.
  

Created: 6 August 2003
Last updated: 7 March 2006