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News: Warning over cash-back phone offers

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 scam works because 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 per 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.

Other cases, clearly cons, abound and include:

  • Missing the date for applying for the first cash-back payment, all future cash-back payment claims are invalidated.
  • Vouchers worth £1300 after paying 18 months rental.  When the vouchers were sent they were returned address unknown.  
  • A number of 12 month mobile phone contracts on the promise of cash-back payments after six months and 12 months. The company said they never received the cash-back applications in the post.

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.”

“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 to accept 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.”

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