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Phone company Interest Rates, Rounding Up, Class Actions and fancy words like oligopoly

By March 4, 2014 General
Today was a fun day in Telecom land in Canada.

An Ontario court has certified class action lawsuits against Telus (TSX:T) and Bell (TSX:BCE) over the practice of rounding up calls to the next full minute.

You can read more about it here.

If you are looking for a good scare. Take a look at your next phone bill, or bill from your current broadband service provider. If it is one of the ‘big guys’ you might be a bit surprised when you see the posted interest rates in their fine print. Here are two examples.

  • Telco 1 example was 51.1%
  • Telco 2 example was 42.58%

Let’s have some fun with this one. I googled “Loan shark” and I found a definition from Wikipedia, the free encyclopedia. It stated:

“A loan shark is a person or body that offers unsecured loans at illegally high interest rates to individuals, often enforcing repayment by blackmail or threats of violence.

In Canada, section 347 of the Criminal Code makes it a criminal offense to charge more than 60% interest per annum. When you calculate what some of these providers charge in interest rates, reconnection fees, late fees and other administrative fees they actually operate above this level.

This is called Usury and it is the practice of charging excessive, unreasonably high, and often illegal interest rates on loans.

Why is this a problem?

Fact is, telco billing is seldom accurate and many end user companies hire people whom analyze telco billing to confirm accuracy – often with little success when challenging what seems to be irregular billing.

Telecom operators in many European countries were forced to meet strict legal requirements for both telco and subscriber expectations to prove that their billing processes work correctly and their subscribers are billed accurately.

In Hungary (as an example), there is legislation where the operator is obliged to meet a legal requirement (specified in the 345/2004 Government Act), which states that “telecom operators have to prove that their billing is accurate and customer rights are respected in the process”.

Look at your bills !