Smart Consumer: Long-term contracts can be costly
Play the field and don't make a long-term commitment if you can help it. That might be bad advice for relationships -- but it's the smartest move for consumers.
Many people are now regretting signing contracts binding them to pricey, long-lasting contracts for phone, TV and broadband services.
When money wasn't so tight, it seemed a good idea to have a talk-all-day landline deal, ultra-fast broadband, a mobile package with a million free texts a month and dozens of high-definition TV channels.
Altogether, the monthly outlay of a couple of hundred euro seemed perfectly manageable during the boom.
However, those bills could now tip many households over the edge.
The growing number of people in financial distress is highlighted by the 9% increase in those who are seeking help from the Money Advice and Budgeting Service in the first half of 2010 (MABS).
Now it has urged telecoms regulator COMREG to force the companies under its wing to be lenient with people stuck in expensive contracts who can no longer make ends meet.
"People (who have to cut back) have to look after the basics first -- light, food, medical and a roof over their head," says Michael Culloty, spokesman for Mabs .
Food and accommodation bills must be prioritised, while the price of not paying electricity bills was amply demonstrated last week by the outcry over the 900 homes disconnected every month by the ESB.
That leaves less-essential items such as TV, phone, gym membership and internet as the only areas where there is room to manoeuvre. Yet these are the very services that are likely to be subject to pricey long-term contracts.
So where exactly are people in a financial crisis supposed to cut their spending?
The answer is that many can't without triggering legal action by suppliers enforcing cast-iron contracts.
Mr Culloty urges COMREG to ease the problem by ensuring telecoms companies demonstrate "the same forebearance" with their customers that banks are being told to use when dealing with mortgage arrears.
In the meantime, what can you do with that expensive TV/mobile/broadband/gym deal that you signed up for and can no longer afford?
Not a lot, except keep paying and be extra-careful next time it comes up for renewal, says the National Consumer Council.
"A contract is legally binding. People need to realise that cancelling a direct debit doesn't cancel a contract," says John Shine, director of corporate practice.
You have to keep paying even if you move and can no longer receive those 197 TV channels.
"(Service providers) are legally entitled to expect fulfilment of the contract and may decide to pursue the consumer (if they renege on it)."
Another issue consumers need to be more aware of is that they can commit to a contract over the phone.
The contractual part of the conversation is recorded and used as evidence that you have committed to the deal.
"However, you are entitled to a seven-day cooling off period in which to change your mind and written documentation within a timely period," advises Mr Shine.
Details of your rights can be found on the NCA site -- consumerconnect.ie.
A spokeswoman for Sky confirmed that customers do have to pay out their contracts, even if moving abroad, but they can downgrade to the minimum package with 31 days' notice.
If they have agreed to a contract for high definition, however, they will have to keep paying for it that until it has elapsed.
If moving house, an installation fee of €77 for transferring the dish applies if a Sky contractor is used but customers have the option of going independently.
A spokeswoman for O2 said there was a small increase in people getting into trouble paying their bills in 2009.
"However, the vast majority of those are less than 30 days in arrears and there as been no increase in 2010."
She says customers can opt for a 30-day contract if they don't wish to commit themselves to a 12-month or longer term agreement.
And this seems to be the best option for most such deals.
Too many people get roped into committing to contracts over the phone without really thinking about it.
Be especially wary if you are rung up by your service provider and enticed into renewing your mobile phone contract solely on the basis of switching to a plan that suits you better.
It often means a rival company is about to unveil a tasty new offer and your provider wants to tie you in so you can't avail of it.
You can move to a new plan with the same company anytime without committing to a new contract.
So stick to the rolling one-month deal unless there is a juicy carrot on offer to make a long-term contract worthwhile -- such as a snazzy new iPhone with a generous data-usage package.
It can be okay to give up your hard-won freedom -- but just make sure you don't give it away for free!