November 4 2009 by Ellen Roseman
In today’s column, I focused on what I think is an unethical tactic — binding customers to verbal contracts for telecom services.
Customers are often unaware of a contract because it’s verbal and disguised as a discount. They say yes to the deal without realizing they have to pay back the incentives if they switch to a rival before the term is up.
I don’t mind a verbal contract if the telephone conversation is recorded and the customer’s approval can be brought forward as evidence. I also believe that a verbal contract must be followed up with paperwork.
How hard is it to send a letter in the mail? Or why can’t companies put information in each monthly bill, including the date the contract starts and ends? Yet telecom companies don’t like to do that.
They’re in the communications business, but they’re either too cheap or too lazy to document their agreements. They seem to think a quick verbal assent to a lower rate is enough to show a customer’s approval of a multi-year commitment.
The new Commissioner for Complaints for Telecommunications Services thought it was a big enough issue that he devoted several pages in his latest annual report to these verbal contracts. (See pages 25 to 28.)
While he doesn’t think he has the power to stop this practice (being funded by the industry, after all), he did suggest that companies take pains to ensure the customer knows of the penalties involved in switching.
The issue of contracts agreed to by phone and not reinforced with paperwork also comes up with furnace and air conditioning service plans, lawn care plans and fixed-price energy plans. The original agreement may be documented, but the renewals are not.
I think we need new laws to protect customers from such abuses. I often hear that when customers ask for proof they agreed to something on the phone, they can’t get a recording that shows they did.