Telecoms regulator Ofcom said it was concerned contracts were not providing “sufficient certainty” to customers due to many firms including mid-contract price hikes linked to inflation.
The new rules explain that customer must be told upfront “in pounds and pence” about any price rises their provider includes in their contract.
The move comes following a review by the regulator in February.
Millions of customers have been hit by bill increases due to high inflation.
The regulator has proposed that businesses outline clearly what payments will increase by during the course of a contract at the point of sale, rather than including an “uncertain future” inflation-linked, or percentage-based, price rise terms.
Ofcom to ban mid contract hike for TV and broadband bills as providers set 8.5% increase
Dame Melanie Dawes, Ofcom’s Chief Executive said: “At a time when household finances are under serious strain, customers need prices to be crystal clear.
“But most people are left confused by the sheer complexity and unpredictability of inflation-linked price rise terms written into their contract, which undermines customers’ ability to shop around.
“Our tougher protections would ban this practice once and for all, giving customers the clarity and certainty they need to secure the best deal for their needs and budget.”
Between January and October this year, Ofcom received over 800 complaints related to price rises – almost double the amount received during the same period in 2021.
In recent years, pricing practices where providers impose an annual rise linked to unpredictable future inflation, plus an additional percentage of typically 3.9 percent, have become significantly more widespread, undermining customers’ understanding of what they will pay.
Virgin Media, which recently merged with O2, was the latest company to introduce inflation-linked price rises in May, according to the regulator.
The company hiked prices in step with the Retail Prices Index (RPI) measure of inflation which was 11.3 percent at the time, as well as an additional 3.9 percent.
Vodafone is also one of the phone companies gearing up to increase prices for mid-contract and out-of-contract customers from April 2024.
In October 2023, the CPI rate was sitting at 4.6 percent. Vodafone typically adds its own annual price boost of 3.9 percent on top of the inflation rate. So, if that inflation rate remains, customers might be looking at an increase of around 8.5 percent by April 2024.
This anticipated increase is less severe than the heavy 14.4 percent increase in 2023, but it’s still higher than previous price hikes in the years before 2023.
