Mobile operators could soon be forced to reduce monthly bills for customers who have finished paying for their handset.
The telecoms regulator Ofcom says around 1.5 million consumers continue to be charged the same monthly fee, even though they should only be paying for the actual calls.
It said the practice was “unacceptable”.
It is now consulting on plans to cut charges, and improve transparency.
One option would be to force operators to put customers on a cheaper tariff once the handset has been paid for.
Another would be to tell them about the range of SIM-only deals on offer.
Earlier this month Citizens Advice said consumers were being overcharged on such contracts by as much as £500m.
Ofcom said consumers should also be automatically notified when they have finished paying for the phone itself.
Some operators, including O2, already do this.
Lindsey Fussell, Ofcom’s consumer group director, said: “We’re concerned that people are not told, or cannot tell, exactly what they are paying for.”
“So we are extending our work on behalf of mobile customers to ensure that handset charges are clear and fair – not just when they enter a contract, but also when their minimum period is up.”
Ofcom said it had been working with operators to find a solution, but “they had not offered sufficient or firm commitments.”
Citizens Advice said Ofcom needed to take the tougher of the options being considered.
“While greater transparency around pricing would be a step in the right direction, what people really want is not to be charged for products they already own,” said its chief executive, Gillian Guy.
“Companies should automatically stop charging people for handsets once they’ve paid them off. Of Ofcom’s proposed solutions, this is the only one that would make sure people aren’t unfairly overcharged.”
Vodafone and EE said they already send text alerts to their customers to tell them when they have paid for their phone, and to explain what their options then are.
Ofcom’s consultation will end on 7 November, with action expected next year.