Pretty understandable, since a brand-new smartphone can set you back over £1000! Taking out a loan through a mobile provider that breaks the payment down into chunks makes things a little more manageable.
Over the past decade, this has become the standard way of getting hold of a new phone – and very little attention has been given to the fact that these deals may not always give consumers the bargain they think they’re getting.
Smartphones are an expensive commodity – but is a length repayment plan as a good deal as it seems?
The Competition and Markets Authority (CMA) announced earlier this year that they would investigate allegations that loyal customers are being “ripped off” for mobile deals.
This announcement came after Citizens Advice found that people who stuck with a single supplier for a range of services were losing an average of £877 per person per year!
People often stick with a single mobile supplier because they’ve been given a deal that gives them the ability to “upgrade” to a new handset every year or so, refreshing the duration of their contract in the process.
Contract-only mobile deals like these aim to make sticking with your current contract more attractive – even after you would’ve normally gone looking for a cheaper deal.
Unfortunately, the rules around these contracts can be pretty difficult to decipher – and many companies just aren’t handling these the right way.
Resolver has seen over 7,000 complaints about upgrades – and many of these result from confusion over the terms of the “free” upgrade.
Many companies advertise their free upgrade as being “a new phone on us” or “on the house”, offering to “pay off” the remainder of the debt you owe on your device plan.
Thousands of people are confused by their terms and conditions – especially when it comes to upgrades.
However, many consumers discover that this isn’t entirely true, finding themselves in a bit of a pickle when they go to upgrade their handset only to be told that they have to fork over a hefty sum of cash to upgrade.
This is because the terms of many contracts don’t actually give you the right to a free upgrade at all – instead, they effectively give you the opportunity to sell your handset back to the company.
Loads of things can affect your chance of getting an upgrade – and you may have been the victim of mis-selling if you weren’t aware of these conditions or were given conflicting information when you took out your contract.
Many contracts have terms and conditions that either prevent you from handing in a damaged phone or say that your phone will be worth less if you hand it in. This is fair enough, really – a cracked screen will affect the company’s chance of selling on the phone.
What is a bit ridiculous, however, is the amount the company may offer you if your phone is damaged.
A damaged screen is pretty cheap to repair – many shops can repair a smartphone’s cracked screen for around £60 (although this will invalidate your warranty and probably isn’t advisable).
However, some businesses will offer you a massively reduced amount for even a small amount of screen damage – offering only £50 for a phone that costs £800 when bought new.
This doesn’t seem right or fair, especially since we’ve heard from consumers who were told by their mobile phone company’s salespeople that if they were to get their phone repaired by a third party (voiding their warranty), they’d be eligible for the full amount!
A cracked screen can pretty much wipe out the trade-in value of your phone!
These reductions should be outlined in the terms and conditions of the contract and should be made clear to you by salespeople before you sign on the dotted line.
Salespeople are often under pressure to meet targets, but should always be clear and honest when describing the terms of the contract to you.
The FCA’s rules say that the terms and conditions of a contract have to be clear, and misleading information like “it’s a free upgrade on us” or “hand in your phone and we’ll give you an upgrade, no questions asked” could be examples of mis-selling.
This hasn’t been properly tested in court, so it might not stand up as an argument, but we’ve heard plenty of stories about in-store sales pitches that leave a little to be desired when it comes to accurate or clear info.
Resolver has heard from a number of consumers who have gone to redeem their “free upgrade” – only to fail a credit check and be rejected.
This may happen because your circumstances have changed since you first took out your contract, but in cases where nothing evident has changed it can be a little confusing.
In some cases, this may be a sign you’ve been a victim of fraud without knowing it! It might be worth checking your credit score as soon as possible by contacting a credit report agency.
Always check your credit score if you unexpectedly fail – you could’ve been hit by fraud!
You may fail a credit check because of an error on the part of the mobile phone company. If this is the case, they should work to correct it as soon as possible.
If none of the above is true and it just doesn’t seem to make sense that you’ve suddenly failed a credit check, something more insidious may be afoot.
Mobile phone companies have to undertake specific checks before they offer you a credit agreement for a new phone. If you suddenly fail a new credit check when you go to upgrade halfway through a contract, the company’s first credit check may not have been up to scratch.
Mobile phone companies have to stick to the FCA’s rules if they’re offering credit options on phones – and irresponsible lending is against the rules.
The promise of a yearly upgrade can keep consumers with a single mobile company – even if they’re suffering because of shoddy service.
It’s important to remember that switching provider can give you the opportunity to look for better service, and credit options that let you refresh your contract’s duration every year might stand in the way of this.
Technically, your credit agreement is separate from your service agreement. In theory, since both are separate you should be able to leave the service agreement if your company isn’t delivering what they’ve promised in their contract. The rules here differ depending on the billing part of your contract – and a company may charge you a fee (which should be outlined in your contract).
However, some mobile phone companies might also ask you to pay off the remainder of your device plan – and with many smartphones costing around a grand, this can be a huge hit to your finances!