Ofcom fines TalkTalk and Tiscali £3m after series of billing complaints

Watchdog takes action after thousands of former customers were billed for services not received

Ofcom has fined TalkTalk and Tiscali £1.5m each after an investigation into complaints from more than 1,000 customers who were billed for services they had not received.

TalkTalk bought Tiscali for £236m in 2009 and struggled to integrate the two billing systems, which caused many problems for current and former customers.

Some 3,000 customers were billed for undelivered services between 2 December 2010 and 4 March 2011, despite Ofcom issuing a legally binding notification in November 2010 to stop these errors occuring.

This was in response to a whopping 62,000 cases between 1 January and 1 November 2010, when customers were billed for services they had not received, particularly those who had closed their accounts.

Ofcom explained that it had reduced the amount of the fine, but still considered the failures to be "a serious breach of the rules".

"Ofcom is issuing TalkTalk and Tiscali UK with a lower penalty than they might otherwise have been given, had they not taken steps towards complying with the rules, and taken action to remedy the harm they caused to consumers," the regulator said.

The two companies are also required to pay compensation to customers affected since 2 December, having already paid out £2.5m in refunds and good will payments to 65,000 customers.

TalkTalk chief executive Dido Harding said that, while the company is pleased that Ofcom had noted the work already done in resolving the billing problems, the fine was unnecessarily high.

"We are of course disappointed at the scale of the fine and feel it is a disproportionate penalty," she said.

"Last year I recognised that we needed to invest in our systems, processes and customer services and we are making significant progress. We have seen a 40 per cent year-on-year reduction in customer service calls."

Consumer rights group Which? welcomed the fine, and urged companies to respond more quickly to customer complaints.

"It's good to see a regulator showing its teeth. A £3m fine clearly shows Ofcom is ready to take meaningful action against telecoms companies that break the rules," the organisation said in a statement.

"TalkTalk and Tiscali UK made repeated mistakes, billing customers for services they hadn't used. This fine recognises the impact of billing errors on customers, and hopefully it will spur other companies to ensure their systems are fit for purpose and kept fully up to date."