Telefonica UK Limited · DRN-6182954

The complaint Mr A is unhappy Telefonica UK Limited trading as O2 says he has an outstanding debt on a fixed sum loan agreement for a mobile phone. What happened Mr A bought a mobile phone (Phone 1) from O2 in August 2024, paying for it with a fixed sum loan agreement for around £1,300, also provided by O2. In February 2025, Mr A decided to trade in Phone 1 for an upgrade, and O2 provided another credit agreement to pay for Phone 2. Mr A intended to send Phone 1 to O2 so it would offset the value against his remaining device plan balance. The day after Mr A received Phone 2, he called O2 and asked to return it – because he wasn’t happy with it. Mr A hadn’t sent Phone 1 to O2 yet, so O2 agreed to cancel the loan agreement for Phone 2 and allow Mr A to return the newer handset. Mr A says he asked O2 what his bill would be and he was told he didn’t owe anything. Mr A asked to port his phone number from O2 and says the text message he received also told him he didn’t owe anything towards any device plans. So he says he relied on this information and thought he no longer had to pay for Phone 1. Mr A says he received a default notice from O2 in late 2025, and this was the first time he had heard he still owed money for Phone 1. He complained to O2 and said it should waive the balance. O2 said Mr A had been told he still had to pay for Phone 1 during a call in March 2025. It also said it had sent Mr A arrears notices before taking steps to default the agreement. But it made an offer to adjust the balance by £100 because it said Mr A had been given the wrong information on calls. Our investigator didn’t uphold the complaint. She agreed O2 could have given Mr A clearer information on the call she had listened to – as O2 had correctly told Mr A he didn’t owe money towards Phone 2 but hadn’t confirmed the balance for Phone 1. However, she felt Mr A was reasonably aware he owed a balance for Phone 1 when he asked to trade it in but then continued to keep and use the phone. She thought the £100 credit from O2 was a fair way to resolve things. Mr A didn’t accept the outcome. He said he relied on the information O2 gave him in good faith. He said he was put in an unfair position by O2 as he is now expected to repay the remaining balance, around £800, in one go. He also said he didn’t receive clear arrears notices so was denied the chance to put things right sooner.

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As Mr A asked for a final decision from an Ombudsman, the complaint has been passed to me. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Having done so, I agree with the outcome reached by the Investigator – and I’ll explain why. Where the evidence is incomplete, inconclusive or contradictory (as some of it is here), I’ve reached my decision on the balance of probabilities – in other words, what I consider is most likely to have happened in the light of the available evidence and the wider circumstances. The complaint is regarding a fixed sum loan agreement provided by O2 for the purchase of a mobile phone. This is a regulated consumer credit agreement, which means our service can consider a complaint about it. Mr A has mentioned an airtime contract in his complaint to our service – our Investigator explained why we don’t have jurisdiction to consider the airtime contract as part of the complaint. So I won’t be commenting on this contract further. By way of context, Mr A originally asked to upgrade Phone 1 using a trade in scheme from O2. The scheme would allow him to return Phone 1 to O2, and it would offset the value of the handset against the outstanding balance he owed on the device plan. Mr A would then continue with a new device plan for Phone 2. Mr A decided not to keep Phone 2 as he didn’t like it, so he returned it within the cooling-off period allowed. As he hadn’t sent Phone 1 to O2 for trade in, he continued to use that handset instead. O2 says it can’t provide call recordings because of the time that’s passed – but Mr A shared a copy of a call between himself and O2 in February 2025, where he asked to cancel the trade in process and return Phone 2. During the call recording, Mr A asked what the bill would be: the advisor said as it was within the 14-day returns window, the device plan should be cleared and no instalments should be needed. At the end of the recording, Mr A confirmed he just needed to send Phone 2 back in the returns pack and nothing else was needed. I think the information O2 provided Mr A on this call could have been clearer. O2 correctly told Mr A he didn’t have instalments to pay for the phone he was returning within 14 days, but the advisor didn’t confirm the next steps for Phone 1’s device plan. On the other hand, the advisor didn’t tell Mr A he would be getting Phone 1 free of charge either. Overall, I think O2 could have provided Mr A with better customer service here. Mr A also received a text when he requested a PAC to port his number away from O2, which said “We hope you don’t decide to switch today, but if you do switch, you’ll have £0.00 left to pay as of 20/02/2025. This is the remaining balance for your Device Plan for this device and any remaining balance for a Device Plan for an Apple Watch, if you have one on this account.” O2 hasn’t explained why the outstanding balance on Phone 1 wasn’t included in this message, and I can understand why it added to the confusion about the balance. I appreciate Mr A thinks O2 should waive the remaining debt on the device plan for Phone 1 because it told him he didn’t owe anything. But, because Mr A kept Phone 1 and had the option to continue using it, or sell it himself, I can’t fairly say he shouldn’t have to pay for the device. This would result in unjust enrichment for Mr A and isn’t something I can do as a fair resolution. Instead, I need to think about the impact this might have had on Mr A, if any.

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I think the unclear communication from O2 caused some confusion about the outstanding bill. But I’m mindful Mr A had taken out the device plan for Phone 1 less than a year before the events of the complaint and had originally agreed to pay for the device over three years. So, as he wasn’t trading in Phone 1 in February 2025, I think it’s reasonable Mr A ought to have thought he had to continue paying for it, even if O2 hadn’t made things clear. O2 also says Mr A called in March 2025 to ask about a payable amount linked to Phone 1. It says this was referred to a specialist team who told Mr A he remained liable to pay for the device plan on Phone 1. O2 isn’t able to provide me with the recordings for these calls, but the account notes for Mr A’s account support the calls took place, and the agent recorded details of this conversation. On balance, I think it’s likely Mr A spoke to O2 at this time, but I can’t confirm how clearly O2 explained the balance owed on the device plan. Mr A says his app with O2 didn’t show an outstanding balance, but I’ve not seen evidence to show this was due to an error O2 made. In any event, O2 has provided copies of several letters it sent to Mr A’s address from June 2025 onwards, including payment reminders, arrears notices and the notice requiring early repayment. The letters were sent after Mr A’s account fell behind on payments when credits applied to the device plan ran out. It’s unclear if Mr A received all these letters or not, but O2 correctly addressed them using the contact details on his account. The letters include the account details for the device plan of Phone 1 and instructs Mr A to get in touch if he has any questions. Based on this, I don’t think O2 did something wrong when trying to inform Mr A of the debt on his account. And as Mr A was given clear notice of the debt before it was defaulted, I think it’s fair for O2 to report the arrears on his credit file. Having thought about everything that happened, I agree O2 could have made things clearer when it explained what Mr A owed towards the accounts. However, I think it made the correct information available to Mr A in other ways and gave Mr A reasonable warning before terminating his device plan. I don’t think it would be fair for me to direct O2 to clear the debt and credit file markers, but I accept O2 could have made things clearer on the available call recording and text message. O2 offered to pay Mr A £100 towards the balance he owed to reflect the poor customer service he received – it’s unclear if this has been paid already or not. I think this is a fair amount based on the circumstances of the complaint. So, if O2 hasn’t already paid this to Mr A, I think it should do so – but I don’t think it needs to pay more compensation, or reduce the balance further. I’d like to remind O2 of its obligations to support Mr A if he can’t pay the outstanding balance in one go. If this is the case, Mr A should be able to discuss reasonable and affordable payment plans with O2 or its debt collection agents. My final decision My final decision is that I do not uphold this complaint. Telefonica UK Limited trading as O2 offered to pay Mr A £100 to reduce the outstanding balance, and I think it should do this to the extent it hasn’t already done so. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr A to accept or reject my decision before 20 April 2026. Hannah Dunkley Ombudsman

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