Mobile phone firms are denying they hide charges of more than £1 per day for handsets after fixed-term contracts expire.
Citizens Advice has accused three major players of failing to reduce bills to reflect that a phone has been paid for – demanding providers make their billing more transparent.
It alleged people with Vodafone were paying up to £38 monthly for top-end smartphones because they remained on the same tariff after the conclusion of a fixed-term contract – usually two years.
The charity said EE and Three were still charging up to £34 for handsets.
Citizens Advice concluded customers were being penalised for loyalty and demanded the industry regulator, Ofcom, step in unless operators raised their game.
Its research found the over 65s were most likely to be caught out by the billing issue, with 23% of such customers on a handset-inclusive deal remaining on it for more than 12 months past the end of the fixed contract.
Customers have a choice of remaining with the same operator on the same contract, taking out a new deal or switching to another provider at the end of their fixed-term.
Citizens Advice chief executive Gillian Guy said: “It is clearly unfair that some phone providers are charging loyal customers for handsets that they have already paid for.
“Phone providers must now make sure that any customers staying in a contract past the end of a fixed deal have their monthly bill reduced to reflect the cost of the handset.
“Providers could make it much easier for consumers to compare prices by separating out the cost of handsets from the cost of services like data and minutes for all contracts, that way it would be much clearer what they’re paying for.”
The Government responded to the report by supporting the charity’s recommendations while mobile operators insisted nothing was being hidden.
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
Three said the terms of its contracts were always clear and customers were urged to get in touch if they wanted to change their plan at the end of the fixed term.
A Vodafone UK spokeswoman said: “Wherever possible, we contact customers nearing the end of their contract to offer them a range of options.”