The management of ChatterBox.com recently sent their customers a letter explaining they may cease trading whilst the Daily Mirror reports its part of 3’s business model
The Daily Mirror recently reported that an investigation led by them proves that a 3 is complicit in what it describes as the mobile phone cashback scandal –
For over a year we have reported on how dealers coax customers into signing pricey monthly contracts with networks by promising cashbacks.
But the money often doesn’t materialise and some dealers have gone bust owing customers millions.
The network giants deny involvement, blaming the dealers. But they were happy to keep these customers.
Now we have a copy of a letter sent by a senior 3 manager proving the network allowed dealers to offer cashback deals without paying for them.
A senior 3 executive wrote to West London dealer Chatterbox in 2005: "Many retailers operating cashback schemes are experiencing a 40 per cent redemption rate."
In other words, only four in 10 who were owed cash back got it. 3 did not tell Chatterbox to do it. But it wasn’t discouraging them either.
We’ve had a string of complaints from Chatterbox customers. Shailesh Patel, from Harrow, W London, is owed £315.
"I bought two 3 contracts and was supposed to make three claims," he said. "The first was due six months ago but I haven’t had any money."
Chatterbox managing director Kevin Patel told us he was unable to pay.
He said Chatterbox became a direct dealer for 3 in 2004, offering cashback deals, but a year later there was a "major change".
"3 were promoting as a business model a cashback system based on the premise that only 40 per cent of customers would actually claim the cashbacks, spread over three stages instead of one payment," says Kevin.
"They gave examples of resellers who were experiencing 40 per cent cash-back redemptions and they encouraged us to follow suit. We had no choice but to compete."
The result was "a disaster" as more than 80 per cent of customers claimed.
Kevin has paid out £6m to more than 20,000 3 customers.
But nearly 3,000 are still owed money. Other dealers told us the same story. One said: "We were made direct dealers by 3. We were told by our account managers to work on low redemptions. A figure of 40 per cent was mentioned.
But everybody claimed and I’ve remortgaged to pay them."
A 3 spokesman said: "Any cashback deal is an arrangement between the retailer and the customer. But in the case of mis-sold contracts, 3 looks at each case on merit."
A mobile expert told us: "Cashback was not the industry’s finest hour and it is a problem for all networks."
Chatterbox.com has recently written to all it’s customers owed cashback –
Firstly, thank you for your custom which is much appreciated and valued.
Recently, there has been a serious delay in cashback payments. For this we apologise unreservedly. In well over 10 years in this business, it is the first time that we have not been able to pay cashbacks.
We believe that you are entitled to know why these delays have occurred and this letter is being sent to you so that you will know what has happened. For many years, Chatterbox.com worked on, and budgeted for, 100% redemption of cashbacks in relation to all cashback promotions with customers. However, in recent years, there has been a change of emphasis by telecom operators (and by one operator in particular). As a result, we were put in a position whereby we adopted a 40% redemption model. This model was based on the business assumption that only 40% of all customers would claim their cashback. This model, however, proved to be wrong as the redemption actually was approximately 80%. As a result, the company’s financial resources were drained. We believe that the problem which we have faced has been caused by the large corporations which introduced the 40% model. We are taking legal advice as to whether we have a claim against these companies. As you will appreciate, we are not at liberty to disclose a great deal about these issues at the present time.
In addition, commission due us from a particular network for significant quality business introduced to them has not been paid to chatterbox.com. This has caused us further difficulties.
We are now looking for ways to recover our position. For over three months, our policy, deliberately taken, has been to cease any cashback business.
Chatterbox.com was and still is facing a huge problem as a result of the actions of certain networks. These networks were warned by us about dealers making customers offers that were uneconomical and unsustainable. They did not listen to us. The outcome has been losses for customers and chatterbox.com.
Please also be aware that we have voluntarily been to Trading Standards to present our case.
Our overriding purpose over the past few months has been to get our customers’ cashbacks paid. Please note that over the years, we have paid well over £6million in cashbacks. Over many years, Chatterbox.com has always acted ethically, morally, legally and has established a strong brand. We are not a multi-national conglomerate, but a small private business that has always put our customers first. It still has excellent relationships with major networks and manufacturers at a very high level.
If circumstances permit, it is our intention to find some method of rewarding customers for their patience.
Our proposed steps going forward are:
• Seek payment to customers via negotiation with Networks.
• If the above fails, pursue legal proceedings
• Seek the involvement of OFCOM, OFT and the media
Please be patient in pressing us for your money; our sole objective is to get you paid. If you insist on immediate payment, we will have no choice but to cease trading. If you give us time, we will not rest until these cashbacks are paid in full. If not, regrettably there will be nothing. Please, once again, sincerest and deepest apologies.
What’s going to happen to cash back in the industry? Be heard, comment below…