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Telephone Bundling Scams

Litigation: 23 March 2019

In recent times Aitken Partners has been approached by a number of small businesses which have entered into agreements with telecommunications providers on terms which they have later found to be unfair and unworkable. The businesses have typically been approached by a sales person with an offer of cheap calls and 'free' equipment. Typically the sales person has attended the small businesses' offices and offered to either match the rates of their existing provider or at a lower level as well as providing free up to date equipment.

The businesses typically find at a later stage that:

  1. the service offered by these providers is poor;
  2. the bills are significantly higher than they were paying before
  3. whereas the businesses either believe they own the equipment outright or will have the option to buy out the equipment for a nominal sum, they are in fact in a leasing arrangement with a finance company;
  4. they have in fact signed agreements with three or more companies in the belief their agreement is with one provider.

The nature of the arrangement is that they are renting the equipment or purchasing it pursuant to a hire purchase agreement (at well above market rate) but obtain credit for this amount against their phone bill. The net result should be that these will effectively cancel each other out. In practice the customer is typically overcharged and required to pay excessive telephone charges over and above the monthly rental of the equipment.

Furthermore, when the telephone provider enters into external administration (as often occurs) or when the customer tries to escape the contract, the customer typically finds that the finance company continues to enforce its agreement and expects the small business to continue to make excess payments for rental or purchase of equipment despite the small business being provided with no telecommunications services.

Aitken Partners has conducted litigation in relation to these matters and can provide advice in relation to any of the contracts signed in relation to these bundling arrangements. In the meantime, if you receive an offer of a telecommunications contract with bundled equipment that looks too good to be true, it probably is, and if you are considering accepting such an offer you should seek legal advice before signing anything.

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