Landline providers Continental Telecom and Plus Save have been wound up in the High Court after an investigation found they had been switching people to their services without permission, a tactic known as 'slamming'.
The firms had particularly targeted elderly, vulnerable people. The Insolvency Service said on Friday that the two companies, which were owned and managed by the same man, Daniel Huxham, had "conducted business with a lack of commercial probity" and "misled the public".
"These companies set out solely to mislead the public," company investigations supervisor David Hill said in a statement. "The court's decision to wind them up shows the seriousness with which this type of dishonest customer service activity is viewed."
According to the regulator, Continental was set up in 2008 and transferred its customers to Plus Save in September last year. The company picked up customers by cold-calling vulnerable people, "particularly the elderly, in order to seek to persuade them to transfer their telephone service from their existing provider to Continental", the Insolvency Service said.
"Customers had been transferred to Continental without their permission," the regulator said. "Customers were persuaded (or misled) into giving their bank details even though they had not agreed to transfer to Continental. However, they were then billed by Continental, and told that a substantial termination fee would have to be paid if they cancelled."
The investigators found that Continental also fooled customers into thinking they were calling on behalf of BT or that their existing BT lines had already been transferred to Continental.
Customers were not given contract documents or informed of their right to cancel during the seven-working-days 'cooling-off' period, and those who did try to cancel during the period found Continental would not cancel or transfer the contract without a financial penalty, as they were obliged by law to do.
Continental also overcharged its customers and charged excessive cancellation fees, and — as there was "a lack of presence" at the companies' registered office, customers found it hard to contact the firms.
Customer forums such as those of the Consumer Action Group (CAG) have recorded many stories of those trying to deal with Continental and Plus Save.
"They managed to get my father who is a frail 87 [year-old] to sign up with them," CAG forum member 'Mrpanks' wrote last year. "He didn't set up the direct debits so they barred outgoing calls. He uses the phone for emergency use as part of a 'panic button' emergency service."
"I contacted the said company and explained the circumstances but they were completely unsympathetic and would only repeatedly insist they needed the account paying," the post continued. "We then attempted to get BT to take over the line. CT cancelled 3 attempts by BT to transfer it. I said I wanted to cancel the account and they said that would cost £250+."