Cash back phones may be cash back cons, warns Citizen Advice

Problem-solving charity Citizens Advice is warning people to be wary of cash back mobile phone deals promising refunds that may never materialise.

The words of caution come during Scams Awareness Month, run by the Office of Fair Trading to alert people to common scams costing the British public a total of £3.5 billion a year.

Citizens Advice Bureaux are reporting increasing numbers of people who have been lured into a mobile phone contract by a sales pitch promising they will be able to claim back most of the money they pay out in monthly bills, making it appear much cheaper than other contracts on offer.

People are tempted by very low monthly rates which look like a bargain. But often they miss out on the promised discount completely and end up paying the full rate – or even being chased by debt collectors and threatened with court.

The cash back offer is not part of the contract signed with the service provider who does the billing: it’s a separate contract with the shop selling the cash back package. Many cash back deals have complex Terms and Conditions buried in small print, and claiming cash back from them may not be as simple as consumers are sometimes led to believe. In some cases the firm that should have paid the cash back has gone bust, leaving consumers with a provider’s contract that is anything but cheap, and which ties them in for a minimum period before they can switch. Customers can find themselves out of pocket to the tune of hundreds of pounds.

In one case a CAB client signed a contract with a mobile phone company offering a monthly cash back deal of £65, slashing the cost from £75 a month to £9.99. After six months the company went bust, and the network provider was demanding full payment of £75 a month.

In another case a client signed up to a package where she got a free mobile and £40 a month cash back on her £60 payment. When the company who should have been paying that £40 ceased trading soon afterwards, she could not afford to keep up the full contractual payments to the network provider and is now being vigorously pursued by debt collectors.

In a third case a CAB client received a letter from his mobile phone company telling him that because he had missed the date for applying for his first cash back payment, all future cash back payment claims would be invalidated. When he checked his contract he found this was one of the terms, but it had not been made clear to him when he signed up to the deal.

In a further case, a CAB client was sold a mobile phone contract promising him vouchers to claim 14 months of cash back, but only after paying 18 months rental. When he sent off the vouchers, they were returned address unknown. He lost £1300 that he had expected to get back.

Another CAB client took out a 12 month mobile phone contract on the promise of cash back payments after six months and 12 months. When she made her first claim the company denied having received it. Her second application, sent recorded delivery, was retuned in the post. Two friends who had signed up to the same contract also found their cash back applications were ‘lost in the post’.

A CAB client entered into a 12 month contract with a mobile phone dealer with terms including redemption of a cash back credit, believing this would reduce his monthly phone bills. He had to claim the credit within 30 days from the date of billing or lose his entitlement to the cash back for the month concerned. Within the month the dealer had gone into liquidation and ceased trading. The mobile network provider refused to honour the cash back agreement, arguing that it was a private arrangement between the dealer and the client to which they were not a party. This left him facing large bills he could not afford.

A CAB client took out a mobile phone contract with a shop offering cash back. He had two phones costing £80 a month but was to get £63 back once the bill was paid each month. He received the cash back cheque for the first few months but then the cheques bounced and the shop disappeared. When he contacted the network provider they said they could not help, so he stopped paying them and has now received a letter from debt collectors threatening court action.

Citizens Advice Consumer Affairs Social Policy Officer Susan Marks said:

“Some cash back deals work well for mobile phone users who sign up to them. But we are seeing growing numbers of people who lose money. People are attracted to these deals because they appear to work out much cheaper than other mobile phone packages, but once the money is handed over it can prove impossible to get it back. In some cases people find the company concerned has vanished into thin air when the time comes that their refund is due.

“Shopping around for a good mobile phone package can be confusing because there are so many different offers out there. The contracts can be complex and often riddled with small print or only available on the providers’ internet site. But we would urge people to always take the time to check the terms carefully and not make snap decisions based on a slick sales pitch. Above all remember that it is much harder to get money back once you’ve handed it over, so don’t be tempted to pay up front on the promise of cash back in the future unless you’re prepared for the possibility that you may never see that money again. Some of the deals which look a little more expensive at first sight may work out cheaper in the long run.”

OFCOM, the telecommunications regulator, is monitoring the situation and Citizens Advice is urging anyone who has experienced problems with a mobile phone cash back deal to report this to OFCOM’s contact centre on 020 7981 3040 or email contact@ofcom.org.uk

However, OFCOM cannot resolve individual problems. Consumers should report these to their network provider, who may be able to help, or consult their local Citizens Advice Bureau.