Low-cost operator Plusnet has been handed a £880,000 fine by the UK regulator.
Ofcom said the BT-owned operator had broken “a fundamental billing rule” by continuing to charge a group of customers after they had cancelled their contract.
In total, 1,025 customers were overcharged for broadband and landline services by more than £500,000 between May 2011 and September 2015.
Plusnet has refunded 356 customers to the tune of £212,140, including interest at a rate of four percent for each customer, Ofcom said.
The company first discovered the error while undertaking “a routine asset reconciliation exercise” and reported the findings to the regulator.
The fine was reduced by 20 percent to reflect Plusnet’s willingness to enter into a formal settlement, Ofcom said.
Lindsey Fussell, Ofcom’s Consumer Group Director, said: “There can be no margin for error, and no excuses, when it comes to billing customers correctly.
“This fine should serve as a reminder to telecoms companies that they must adhere to Ofcom’s billing rules at all times, or face the consequences.”
Plusnet was founded in 1997 and does not publicise the number of customers it has.
A spokesperson said: “We are very sorry and would like to apologise to the 1,025 customers affected.
“We reported this ourselves to Ofcom, and made every effort to contact these customers to arrange a full refund before the investigation started.
“We would also like to reassure all customers this was an isolated historic issue and we have implemented a number of new robust measures to make sure this doesn’t happen again.”
In January, Ofcom fined EE £2.7 million for overcharging tens of thousands of customers in 2014 and 2015.