Mobile phone companies have been accused of charging loyal customers over the odds.

Companies are overcharging customers by up to £38 a month, a shock report released on Friday reveals .

Analysis by Citizens Advice found customers of Vodafone, EE and Three who choose to stay on the same plan after their fixed deal ends do not get their bills cut - meaning they are paying an £22 a month extra for a handset they have already paid off.

The companies defended their pricing policies, claiming customers had the freedom to chose the best options.

The extra cost can be as much as £38 a month on for contracts with high-range handsets like the iPhone 7 128/256GB, the Galaxy S8 and the Xperia XZ Premium, Citizens Advice said.

Customers of EE, Vodafone and Three may have been over-charged for their phones
Customers of EE, Vodafone and Three may have been over-charged for their phones

Citizens Advice chief executive, Gillian Guy, said: “Some of the largest mobile phone providers are routinely overcharging their loyal customers.

“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.”

Digital Minister , Matt Hancock, said: “It’s only right that mobile customers should be notified when they have paid off the price of their handset, and that their future bills should reflect this.

“I welcome Citizens Advice’s call for better billing information for consumers, and hope that providers will now take the initiative by clearly separating the cost of handsets and tariffs in mobile contracts.”

Nina Bibby, chief marketing officer of O2 - the only big British mobile phone firm not criticised in the study - said: “Forcing customers to continue to pay for a phone they already own not only hits their pockets but undermines trust and the reputation of the industry.

“We’d like to see the other operators review their position and follow our lead.”

A Three spokeswoman said: “Whenever a new customer signs with us, we make the end-date of the contract term very clear.

“We encourage all Three customers to contact us if they would like to change their plan at the end of their fixed term deal.

“We appreciate any feedback to help us improve our processes and are exploring new ways to ensure our customers can get the most out of their mobile phones at a competitive price.”

A Vodafone UK spokeswoman said: “Wherever possible, we contact customers nearing the end of their contract to offer them a range of options.”

EE said: “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.”