Ofcom has found TalkTalk in breach of the Communications Act 2003 after a six-month investigation, saying that the ISP was guilty of "dishonest, misleading or deceptive conduct".
TalkTalk was judged to have contravened General Condition 24.3 (GC24) under section 94 relating to the mis-selling of products.
Ofcom also noted that there was evidence to suggest that the operator was engaging in an illegal practice known as slamming, whereby it switched users to TalkTalk without their consent.
Additionally, the firm was deemed to have breached GC24.9 and GC24.10, which concern customer contract termination rights.
The Ofcom investigation was launched in November 2010 after complaints from TalkTalk customers. Following its conclusion, the telecoms provider has been given until 20 June 2011 to inform the regulator how it will remedy the situation.
Ofcom outlined eight conditions that TalkTalk should meet in order to stop breaching regulations. These include allowing customers who were mis-sold a service to cancel their contract, regardless of length and without the need to pay a penalty.
In a statement sent to V3.co.uk, TalkTalk said that it is taking its responsibilities "extremely seriously" and is working to meet the deadline.
"We have processes in place to help our employees be accurate in every case and we invest heavily in the training and monitoring of our sales and retention teams," a spokesperson said.
"Improvements in the language used and the materials provided are constantly being made, and we will be providing Ofcom with detailed information about our ongoing programme to maintain the highest standards in all of our transactions with our five million customers."
This is not the first time that TalkTalk has found itself in hot water with Ofcom. Together with Tiscali UK, TalkTalk was ordered to pay almost £2.5m in refunds and good will payments in February.
Operating under the banner of the TalkTalk Group, the two firms had issued bills for services consumers had cancelled, leading to over 1,000 complaints to Ofcom.
In April, Ofcom also revealed that TalkTalk and Three were the most complained about telecoms providers.
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