Image copyright Getty Images

Mobile phone group Giffgaff has been fined £1.4m by regulator Ofcom for "unacceptable" billing mistakes that saw 2.6 million customers overcharged.

Ofcom said Giffgaff, owned by O2's parent Telefonica, overcharged people up to a total of almost £2.9m.

"Getting bills right is a basic duty for every phone company," said Gaucho Rasmussen of Ofcom.

"But Giffgaff made unacceptable mistakes, leaving millions of customers out of pocket."

He added: "This fine should serve as a warning to all communications providers: if they get bills wrong, we'll step in to protect customers."

Ash Schofield, Giffgaff chief executive, said he would "like to apologise" to affected customers and thanked them for their "ongoing support".

"As a business, we have already begun - and will be fully - implementing the recommendations within Ofcom's final decision," he added.

The problem occurred because customers who bought a Giffgaff "goodybag" bundle - comprising voice and text minutes as well as data allowances - using their prepaid credit, were overcharged.

Ofcom said there was a delay in Giffgaff applying the bundle purchase to customers' accounts. This meant that any voice calls made, or data used, came out of their pre-paid credit.

The regulator said the services should have been free immediately from the point the bundle was purchased, and customers had effectively been charged twice.

"Ofcom rules require telecoms providers to bill customers accurately for the services they use," the regulator said.

Refunds

Ofcom said that Giffgaff - which uses O2's network to provide mobile services to its customers - had already refunded about £2.1m to affected customers.

In lieu of those customers it has not been able to trace and refund, it has donated the money to charity, some £750,000.

Customers who consider they are still due a refund can contact the company.

Ofcom's fine includes a 30% reduction as Giffgaff agreed to settle the case and admitted the breach identified.

In April, Giffgaff came top of Which?'s annual mobile survey which names the best and worst operators.

Nearly all Giffgaff customers said it was "good or excellent" for value for money, adding they would recommend it to friends and family.