Ofcom has censured TalkTalk over its charging of customers for services that were not provided.
On Tuesday, the regulator told the UK's largest ISP to "stop breaching telecoms rules or they could face further enforcement action, including a possible financial penalty", according to an Ofcom statement.
"Ofcom is determined to stand up for consumers and take action against companies that break the rules," Ofcom consumer affairs director Claudio Pollack said in the statement. "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."
Ofcom said it had received more than a thousand complaints this year alone over TalkTalk and Tiscali UK's bills for services that consumers had cancelled. TalkTalk's parent company Carphone Warehouse bought Tiscali UK last year and rebranded it in January this year under the TalkTalk brand.
According to Ofcom, one complainant had cancelled her TalkTalk landline in January, but had continued to be billed for it afterwards. Another customer cancelled her Tiscali UK account in February 2006, but subsequently received demands from debt collectors and paid more than £600 that she did not owe.
The regulator told the ISP to refund those customers who had been affected and stop debt collection action and legal proceedings against them. TalkTalk will also have to contact credit rating agencies to try and repair affected consumers' ratings.
TalkTalk said in a Tuesday statement that it had "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," the statement continued. "TalkTalk Group has co-operated fully with Ofcom's investigation and we apologise for the inconvenience caused to this limited group of former customers."