3/18/2009 12:22:00 PM
Operators to carry responsibility for retailers’ cashback
Ofcom will have new powers from September to hit mobile operators and retailers with fines of up to 10% of their revenue, if they are found in breach of its new rules on cashback and mis-selling.
Ofcom said although complaints on cashback have drastically fallen, there is still a high level of complaints on mis-selling: an average of 200 per month.
In the middle of 2008, complaints were at 300 per month.
High profile cashback collapses in 2007 such as Dialamobile, as well as broader issues on retailers not paying their cashbacks, have pushed the issue into Ofcom’s remit.
Operators now carry the responsibility to make sure retailers do not go bankrupt because of unsustainable business models, and that they are operating within the regulator’s rules.
Claudio Pollack (pictured), Ofcom’s director of consumer policy, said: ‘If a retailer goes out of business and the mobile operator’s due diligence was insufficient, we would then find the operator in breach of the rules.’
Ofcom had originally discussed a blanket rule where the relevant operator would meet the outstanding cashback bill for customers when a retailer went bust.
Pollack added: ‘The operators did push back on that. But our reason for blocking it is that we believed it would have a very severe and detrimental impact on the market. Operators would not deal with retailers offering cashback, as they couldn’t be sure of a retailer’s stability.’
He said cashback continued to be popular with the majority of consumers and it was important to put measures in place to ‘make the consumer experience
far better’. Cashback is believed to have been making a comeback in recent weeks, as more consumers look for cheaper deals, and retailers work harder to entice customers.
There are no specific numbers of complaints that trigger an investigation, and no clear relationship between complaints and fines due to the complexity of the issues, Ofcom said.