In 2011, three directors of a telecoms company in Norfolk were sent to jail for fraud. They enticed companies and charities with the promise of free phones, but those who took up the offer found themselves stuck in expensive, long-term contracts.
Scams like these keep resurfacing – and companies keep getting caught out.
They usually start with the promise of a new phone system for less than a firm’s current outgoings, backed up with a proposal that purports to compare current and future costs. Typically, these imply large savings, but in reality they are very short on detail and obscure the fact that you’re signing a lease hire agreement, plus a long-term commitment to lines and calls.
If you are approached with this type of deal, here are the questions to ask. Only accept answers in writing and if you sign the contract, add a clause based on the responses you received and state that it is on that basis that you’ve signed.
Reputable suppliers who have a genuine offer should be willing to answer these questions and agree to make responses part of the contract.
Once you have all the answers, rework their ‘before and after’ pricing. Does it still show a saving or has it swung to a point where it is costing you money?
If you have already signed one of these deals, there is still hope. If there was a false inducement to purchase, the deal could be struck down by a court. Trading Standards is another option. If you are a company of fewer than 10 people, check to see if the supplier is registered with the Ombudsman scheme (www.ombudsman-services.org/communications.html), as they offer free binding arbitration.
There are some genuinely good deals being offered but there are also far too many dodgy ones. The old adage, ‘if something looks too good to be true’, holds here – if it looks too good, it’s probably dodgy.
- What are the actual prices for the lines and calls? Compare the prices to your current bills to confirm the claims. Are those prices guaranteed or only for the first year? Do you have the right to cancel if they raise prices?
- Have they quoted for all the services you currently receive?When comparing costs, many proposals include money you might be paying for an alarm line or lines for PDQs in your current costs but exclude them from the proposed costs.
- When they present back your existing costs, check them against your actual bills. Go through your recent bills and check that they are accurately reflected in the current cost column of the comparison.
- Is the system being provided on a lease hire or lease purchase?If the latter, what are the options at the end of the contract? Is there a cost for the transfer of title so you actually own it? If so, is that reflected in the claimed savings? If it is a lease hire, what happens at the end of the agreement? What happens if you need to expand the system during the lease? Will any equipment that’s added link to the same end date as the original agreement?
- Ask for a separate quote for outright purchase of the equipment. Then ask other suppliers for a purchase price so that you can compare. Ask them to break out the different elements of their costs, rather than just giving a total figure. Ask them to confirm the rate of interest being charged.
- What equipment is actually being supplied? Ask for the make and model of all elements. Visit the manufacturers’ websites and see if they are current and the prices quoted are right.
- Are there any charges that will be levied that are not identified in the proposals?
- Who is providing the finance? If it is a third party finance contract, be wary as it will be harder if you want to challenge the contract later. If the finance is provided by the supplier or the equipment manufacturer then you have a greater chance of disputes being resolved.
Dave Millett is an independent telecoms adviser with more than 35 years’ experience in the telecoms industry. He has worked in European Director roles for several global companies and now runs Equinox, a leading independent brokerage and consultancy firm. He works with many companies, charities and other organisations and has helped them achieve savings of up to 80%. He also regularly advises telecoms suppliers on how to improve their products and propositions.