TalkTalk and Tiscali UK could face fines after charging customers for cancelled services, regulator Ofcom said today.
The two organisations, which are both part of the TalkTalk Group, have been threatened by Ofcom with enforcement action if they fail to stop breaking telecoms rules.
The TalkTalk Group could be hit with a fine of 10 per cent of its annual turnover if it fails to comply by 2 December.
"Ofcom is determined to stand up for consumers and take action against companies that break the rules," said Ofcom's director of consumer affairs Claudio Pollack.
"Our investigation into TalkTalk and Tiscali UK found that they had billed customers for cancelled services; this is unacceptable which is why we have ordered them to clean up their act or face the consequences."
Over 1,000 complaints were sent to the regulator after bills were sent to consumers for services that were not provided.
One consumer said he had paid a total of 609.97 to Tiscali for services which were never received.
Another, who changed landline provider from TalkTalk in January 2010, said she spent an hour on the phone trying to resolve the issue with the provider but continued to receive bills.
TalkTalk and Tiscali have been told to take a number of remedial steps, including handing refunds to customers who were billed for cancelled services since 1 January 2010.
They have also been ordered to stop any ongoing debt collection or legal proceedings and to take any necessary action to help repair the credit ratings of affected parties.
"TalkTalk Group has co-operated fully with Ofcom's investigation and we apologise for the inconvenience caused to this limited group of former customers," a statement from TalkTalk read.
"We identified an issue with the cancellation process for ex-Tiscali customers caused by an error on a legacy billing system. We are resolving this by migrating all ex-Tiscali customers onto one network and billing system which will allow us to process cancellations much more effectively."
TalkTalk was criticised for a billing decision earlier this year, when it increased its line rental cost by more than 50 pence.
The telecoms firm had previously criticised the broadband tax proposed by the last Government, which would have been around the same cost per British tax payer.
