Contract Confusion: Irish Consumers in the Dark over Early Exit Fees

Gas, electricity, broadband and mobile phones are essential utilities and services for Irish consumers, but research commissioned by independent price comparison and switching service Switcher.ie shows that many households are in the dark about early exit penalties on their contracts, and this could be costing them dearly.

The research shows that almost three-quarters (74%) of Irish consumers are confused about these fees, with 33% unsure if they’d pay a penalty for cancelling contracts early, and 41% not aware of how much the penalty would be. Consumers could end up paying the price for this, as an investigation by Switcher.ie has shown that almost all companies that provide these essential services do charge early exit fees – and these can amount to hundreds of Euro.

The energy market makes this information clear for consumers, with most suppliers charging a flat fee of €50 per fuel if a customer cancels within the minimum term, which is typically 12 months. However, consumers who are trying to calculate early exit fees for their broadband and mobile phone contracts may have difficulty finding this information. Switcher.ie’s investigation found that the majority of broadband and mobile phone providers will require customers to pay the monthly charge for the remainder of the term.

Given the costs involved, the lack of transparency and understanding around minimum contract terms and early exit fees could have a significant financial impact on consumers.

Eoin Clarke, Managing Director at Switcher.ie, said: “We would urge suppliers to make it really clear to consumers what their minimum contract term is, and what they will be charged if they leave before the end of this term. During the course of our investigation, we discovered it’s not easy to find this information on some provider websites. We’d encourage consumers to pay special attention to the minimum term, discount period and early exit fees when they’re signing up to any contract.

“It’s vital that a lack of transparency around minimum terms and early exit fees does not become a barrier to switching. The market for household essentials is competitive at the moment, so if consumers are aware of when their minimum term ends, they can freely shop around for a better deal, which will help them to keep their costs down.

“It’s also important that the early exit fees actually reflect the cost to a supplier of a customer ending their contract early. Arguably, charging someone the full monthly cost for a product or service they are no longer receiving is not an early exit fee, as they’re basically being required to pay the full value of their contract.

“The average energy customer can save up to €360 per year by switching to the cheapest deals on the market, so consumers should keep a note of their minimum term and be sure to switch when this ends to make significant savings.”