Small businesses are being warned to take care when signing phone contracts that come bundled with incentives like laptops, overseas holidays, PABX phone equipment and even beds.
The Telecommunications Industry Ombudsman (TIO) is receiving up to 20 complaints a week from businesses that claim they had been misled when signing contracts, or didn’t fully understand the conditions before signing up.
“We’re aware of several telecom companies doing a telemarketing pitch, then following up by going out to small businesses, offering the same deal as their current telecommunications provider but with an incentive thrown in,” says spokesman Philip Money.
The deals are often too good to be true and small businesses don’t realise they are signing two contracts: one for the phone calls, and one for the lease of the equipment from a finance company.
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Companies are enticed by “credits” off their phone bill, which the telecommunications company uses to subsidise the monthly lease payments for the finance contract.
Businesses that have complained to the ombudsman say the package turns out to be more expensive than their old telecommunications deal, Money says. If they then decide to transfer to another phone company, they’re still bound by the finance lease, minus the call credits.
The TIO has the power to release people from telecom contracts on certain grounds, but the finance company lease still stands and the small business is stuck with the lease.
“Some of these deals may work out well for small businesses, but if a similar deal offered to you, make sure what you’re getting into. Buyer beware,” Money says.
Small businesses should be careful when signing contracts, taking particular care to ask:
- Who are the parties involved in the deal?
- How many contracts are involved with the deal, and are they just with the one company?
- What services are being offered? If “credits” are offered to offset lease payments, how much are they worth and when do they need to be paid?
- If there’s a lease, what are the monthly installments and how long is the lease for?
- How much does the deal cost over the term of the contract?
- Is the deal actually cheaper than your existing telecommunications arrangements?
Businesses can also contact the ACCC Small Business Hotline on 1300 302 021.