Three of the four largest mobile phone networks overcharge customers extra for a handset after the cost has been covered in their fixed deal.
The consumer group Citizens Advice found that customers of Vodafone, EE and Three who choose to stay on the same phone plan after their fixed deal ends do not get their bills reduced. This means on average customers are paying an extra 22 a month for a phone that has been paid off, according to the group.
The group explained that customers take out a mobile phone contract with the cost of the handset included in the deal which is then paid off on a monthly basis for a period of two years.
Despite this, customers with the three networks who decide to stay on the same contract with their provider, instead of taking out a new contract or moving to a new provider, are charged the same amount as when they were paying for the handset.
For contracts with high-end handsets, the extra money paid can be as much as 38 for devices like the iPhone 7 128/256GB, the Galaxy S8 and the Xperia XZ Premium.
Analysis from Citizens Advice has found that customers who buy a 256GB iPhone 8 could be overcharged by 46 a month on average.
Gillian Guy, chief executive of Citizens Advice, said: "Mobile phones are now an essential part of modern life, but the way that the cost of handsets are hidden within some mobile phone contracts gives phone providers a way to exploit their customers.
"It is clearly unfair that some phone providers are charging loyal customers for handsets that they have already paid for. It's especially concerning that older customers are more likely to be stung by this sharp practice."
The group found that 36% of people with a handset-inclusive contract stayed in the same contract past the end of the fixed deal period, with 19% staying in the same contract for over six months afterwards.
Furthermore, 23% of over 65s with this kind of contract stayed in it for over 12 months past the end of the fixed deal period, compared to 13% of people aged under 65.
Citizens Advice has called for Ofcom to act in order to protect consumers and wants network providers to reduce their customers' bills when they stay on the same contract past the end of a fixed deal.
A spokesperson for Three told IT Pro: "Whenever a new customer signs with us, we make the end-date of the contract term very clear. We also let them know that they can contact us at any time to discuss the range of options available should they wish to change their plan with us."
An EE spokesperson told IT Pro: "Separating phone and tariff doesn't always represent the best deal for consumers, it can sometimes result in them paying more, and EE customers have the flexibility to choose the tariff and upfront phone cost that's right for them. We send our customers regular updates about their options before and after they reach the end of their contract, and the vast majority of our customers upgrade to a new phone or move to a SIM-only plan near the end of their contract."
A Vodafone spokesperson told IT Pro:"We strive to give our customers the price plan that best suits them. Wherever possible, we contact our customers nearing the end of their contract to offer them a range of options. These include being able to upgrade their handset, receiving an extra allowance to enhance their existing plan or, if they choose, switching to a SIM only plan. Customers can also change phones after just six months with our flexi-upgrade."
Ofcom fined EE 2.7 million for overcharging 40,000 customer in January. The mobile operator broke a billing rule when it charged these customers for calling its 150 customer service number while roaming in the EU between July 2014 and July 2015.
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