So... We have recently had a case come up where a DCA was stating that a Mobile Phone Contract was part of the Consumer Credit Act of 1974. This raised a few questions so we'd like to clarify this stance.

Currently - No Mobile Contract is subject to a Consumer Credit Agreement however they are exceptions to this rule and it is not always clear.

When taking out a contract it can be done in one of 2 ways and this is becoming a focus of some companies.

1 - The contract is purely a service agreement and the customer is expected to pay the monthly rental of the contract for the prescribed terms before being released from said contract. This is known as a "Service Agreement" with a "Free Gifted Handset" that is factored into the final cost.

2 - The contract is split between 2 agreements - 1 x Service Agreement for Airtime only (Calls, Texts & Data etc) and 1 x CCA for a Mobile Phone Handset / Tablet Device - "Device Plan" - Your monthly bill is 2 separate costs which form the "Monthly" tariff you pay which would equate to the "Service Agreement" Option above.

This provides a lot of flexibility allowing customers to upgrade early and their tariff automatically reduces after paying off the handset device cost on its own to the airtime agreement. Useful if after 24 months you want to keep the same tariff and dont have to adjust the tariff to get the best deal.

Which companies do these?

Currently we know of 3 companies

O2 / Telefonica

Virgin Mobile

Tesco Mobile

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They all operate their own Terms and Conditions for said contracts which vary across revisions etc

Virgin Mobiles - HERE

O2 - HERE

Tesco - HERE

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Costs look like this;

Representative example

Duration of credit agreement - 24 months

Upfront cost - £0.00

Monthly device payment - £19.00

Total Credit amount - £456.00

Total amount payable for device - £456.00

Interest rate (fixed) - 0%

Representative APR - 0%

Device cash price - £456.00

What to look for on my CRA?

Mostly, there should be either 1 or 2 entries on your Credit File for these accounts.

1 is for the Financing of the handset @ 0% APR mostly

The other is the Airtime Plan. Depending on how many accounts / contract you have with them, you could have a large quantity of telecoms accounts appearing on your CRA.

This may trigger a negative result to your score so please be weary when taking out these deals. While scores are for the most part a guideline, having 2 extra accounts could be detrimental to your chances for credit in the future if not well managed.

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What happens if i default on my contract?

This will mean that the company will be liable to send you a default notice to remedy the arrears under the Consumer Credit Act Of 1974. However this is for the Handset Finance agreement only.

They will also send you a further letter confirming that your services may be cut off / have been disconnected and find you in default of the agreement that you signed up to for the Airtime Plan.

However be aware that for the Airtime Agreement - There is no law and this is NOT subject to the Consumer Credit Act.