Phone, broadband and pay-TV providers will be forced to alert people when their current contract is coming to an end under new rules introduced this weekend.
The new rule from regulator Ofcom, which comes into effect on Saturday, could save some households more than £150 a year.
Ofcom says around 20 million customers are already out of contract – including 8.8 million broadband customers – with many spending more than they need to.
It claims that every day, 25,000 broadband customers come to the end of their contract, usually leading to an automatic price hike.
However, 16 per cent of broadband customers do not know if they are in contract, particularly older people, with 21 per cent of over-55s unaware.
The average broadband customer could save around £100 a year as a result of the changes introduced by Ofcom, although some could save even more
Measures introduced by the regulator will mean that home telecom firms must inform bill payers between 10 and 40 days before their contract comes to an end via a text message, email or letter.
‘Millions of people are out of contract right now and paying more than they need to,’ said Lindsey Fussell, Ofcom’s consumer group director.
‘These new rules make it easier to grab a better deal.
‘But you don’t need to wait to hear from your provider. Just a few minutes of your time could save you hundreds of pounds.’
Richard Neudegg, head of regulation at price comparison site Uswitch.com, said the changes should finally put an end to the ‘murky practice’ of automatic price hikes and help consumers consider their options.
‘Uswitch has spent years campaigning for these measures, which we hope will give a much needed shake-up to the industry and put more power in consumers’ hands to get off packages that are no longer good enough,’ he said.
Currently, providers don’t have to remind customers when their minimum contract period is coming to an end or explain what will happen after the contract ends.
Customers who do nothing when their minimum contract period ends are likely to continue on a monthly rolling deal and can face price increases or changes to their original deal.
‘Until now, providers have been content to allow loyal customers to pay a great deal more than new subscribers,’ said Matt Powell, Editor at price comparison service Broadband Genie.
‘Many broadband deals are sold with discounts for the initial contract term, and although these are often good value for the first 12 or 18 months, the cost after the discount ends can be substantially higher.’
Under the new rule, providers will need to tell customers when their contact is up and what they have been paying until now, as well as what price they can expect to pay once their contract is over.
From this Saturday, February 15, telcos will need to tell their customers when their contact is up, what they have been paying, and the price they can expect to pay once their contract is over
The notification must also state any notice period for leaving their provider and the best deals available, and also reveal any prices only available to new customers.
Anyone already out of contract must be sent a reminder every year of the best options on offer.
The average broadband customer could save around £100 a year as a result of the changes, though some could save £150 or more, according to Ofcom research from last year.
It believes around three million could actually pay less by upgrading to a faster broadband package.
With the new rules, providers will have to send their customers the cheapest deals that they can switch to.
‘When you receive this information, it is worth remembering that you don’t have to accept the deal on offer as it may not be the best option for you in the market,’ Neudegg said.
‘To ensure you are getting the best possible deal for your needs and, armed with details of how much you are going to be paying, it is a good idea to run a quick comparison to see what other providers are currently offering.
‘It’s not just about price, though – if you’re on an outdated connection, switching provider is also a great opportunity to move to a faster service.
‘Don’t wait for a letter to drop through your front door if you know you are out of contract – get online now and start researching what deals are available, even if they are with your current provider.’