Commission for protection of consumers bans mobile operators from charging high early termination fees

The Consumer Protection Commission has banned unfair aggressive commercial practices by mobile operators regarding the maximum amount of penalties. The Chairperson of the Commission Maria Filipova on September 4 issued administrative acts to prohibit the unfair aggressive commercial practice.

"Through abuse of influence, the operator imposes all kinds of excessive and irrelevant extra-contractual obstacles on the consumer when the latter wishes to exercise his rights under the contract, including consumer’s right to terminate the contract or to choose another product or service or another trader," the Commission said in a press release.

A number of consumer whistleblowers have reported to the Commission that, in addition to the penalty of three standard charges, the operator additionally charges a penalty for discounts granted on monthly charges and a penalty for discounts granted on end-device prices (where the consumer has also purchased an end-device at a discounted price) when terminating the contract early. The consumers' allegations are supported by the monthly bills and invoices attached to their complaints, which show that the operator actually charged these penalties.

In accordance with the terms of the contract, where a contract for electronic communications services is terminated early through the fault or initiative of the consumer, the mobile operator is entitled to demand payment of a penalty of no more than 3 standard monthly fees for each of the subscription plans in respect of which the contract is terminated early, according to the Commission's experts.

However, in addition to the penalty agreed in the contract, there are instead two additional clauses allowing the operator to claim discounts on the monthly subscription fees until the end of the contract and the difference between the standard price of the device and the price paid by the consumer corresponding to the remaining period of the contract. This, as a final result, circumvents the maximum penalty threshold of three monthly subscription fees for individuals.

These are terms to the detriment of the consumer, which undermine good morals and lead to a substantial imbalance between the rights and obligations of the trader and the consumer, by obliging the consumer to pay an unreasonably high compensation or penalty in the event of non-fulfilment of his obligations.

By their very nature, those clauses constitute penalty clauses and are compensatory in nature, notwithstanding the fact that they are referred to as discounts on subscriptions and end-device prices. The right of the mobile operator to claim these penalties arises on the basis of the early termination of the contract due to the fault or initiative of the consumer. That is to say, on the same basis as the penalty of three standard charges. Accordingly, those liquidated damages were agreed to the detriment of the consumer and do not satisfy the requirement of good faith.

The inclusion in the contract of several different and concurrent penalties for the same non-performance, exceeds the remedial and compensatory function of the penalty and the penalty is unreasonably high.

In the course of the administrative proceedings for the issuance of the orders, it was established that mobile operators abused their influence by taking advantage of the position of the stronger party in their legal relationship with the consumer to interpret the penalty clause in the contract exclusively in their own interest and, without any legal basis, to charge additional penalties in addition to the agreed maximum amount of the penalty for individual consumers. In this way, the company imposes non-contractual obstacles on the consumer when consumers wish to exercise their rights under the contract, including the right to terminate the contract early upon payment of the penalty agreed in the contract up to a maximum of three monthly standard subscription fees for the fixed-term subscription services for which the contract is being terminated.

These actions are undoubtedly likely to change the behaviour of the average consumer in relation to the service, causing the consumer to abandon the decision to terminate the contract early in view of the excessive penalty charges, a decision which the consumer would not otherwise have abandoned or might not have abandoned had the operator not applied this aggressive unfair commercial practice, the Commission's experts point out.