More and more people are encountering debt problems and entering into an IVA or debt management plan due to mobile phone contracts; there are two driving factors behind this.
Firstly, the expensive cost of handsets; but with relatively low barriers to ownership. The latest smart phones cost £400-£500 but many people who would otherwise not be able to afford this are able to do so due to these being sold with a network contract often over 24 months. Sign up to a deal at say £35/month for 24 months – That’s a commitment of £850; plus the costs of (some) calls and other services.
Then there is the cost of data roaming abroad; I’m talking here about UK handsets being used in continental Europe.
If you’ve got data roaming activated; then your normal usage may soon rack up massive bills. If you’re logged into apps such as Facebook that update themselves in the background, then the meter is always running.
Familiar with the popular iphone and Android game Temple Run? How much do you think it would cost to download that while on holiday in Spain? The answer is about £75. I’m basing this on O2 which charges £3/meg and the size of the app on Android with is 24Meg. Just checking your location on Google maps will cost about £2 to load the first map. The debt can soon mount. This can be a particular problem for parents of young adults on trips abroad where the contract this in their name.
There was a recent story covered by The Guardian about a T-Mobile customer who kept data roaming active during a 7 day trip and used her iPhone to research and locate restaurants in Istanbul. This resulted in a bill for £2,318. T-Mobile reduced the bill to £350 as the gesture of goodwill.
O2 have responded to this by limiting usage and not charging client more than £50 in any monthly bill.
We had an enquiry recently from one lady who owed over £15,000 on mobile phone contracts. She worked on a self-employed basis for a cosmetics company and had 20 contracts in her name for mobiles used by agents she employed on a commission only basis. Then her enterprise ran into problems; then she was unable to pay the outstanding bills.
Debt from outstanding mobile phone bills can be included in an IVA or debt management plan; but only once the client is no longer using that provider and the phone is disconnected from their network.
Paul Garside has a background in finance and debt management, often writing informative articles on behalf of Harrington Brooks.