The TIO’s Industry Improvement team is monitoring complaints from consumers who have received unexpectedly high bills in their first month of a plan or in a final bill.
These complaints can come about as a result of providers not disclosing enough information about how a new or departing consumer may be affected by the company’s billing cycle.
Consumers discover they have been billed a “pro-rata” amount of their included value because the date they signed up or transferred away didn’t align with the provider’s billing cycle. The provider calculates a value entitlement based on the number of days the consumer uses the service within the billing cycle, and as a result, consumers may incur excess charges if they go over that part-included value.
For example, if a consumer signs up to a $40 per month plan with an included value of $400 half way through the provider’s billing cycle, the provider will consider that they are only entitled to half of their included value, or $200. Any use over that would be charged as excess usage.
Our Industry Improvement team has been monitoring this practice as consumers may not have received enough information about pro-rata charging prior to their signing up or transferring away.
The issue is concerning because consumers are generally not aware of how the provider’s billing cycle works when signing up to a new service. They also have little control over the time it takes to complete a transfer when switching providers. In either case, consumers have limited control over the excess usage charges.
We encourage consumers to discuss pro-rata charging with their provider before signing up to a new service. They should also check their original contract before they switch to another provider, particularly if they have been in a long-term agreement.
The TIO’s Industry Improvement team continues to raise these concerns with providers and is working with them to ensure they provide full information to consumers.