TalkTalk, the UK’s second-biggest broadband provider, has been given a legal warning by the communications regulator; Ofcom to stop breaching telecoms rules after they were found to have issued bills for services that had not been provided. The regulator instructed the group to clean up its operations or face the consequences.

According to Ofcom, it may fine TalkTalk after finding the group had breached regulatory rules by issuing customers with bills for services that had been cancelled.

Ofcom has received more than 1,000 complaints about TalkTalk this year, mostly focused on bills for services that were not provided because they had been cancelled. Some of the complaints relate to the UK phone and broadband operations of Tiscali, which combined with TalkTalk last year.

The watchdog has given TalkTalk one month to comply with the rules. If the group fails to do so, it faces a fine of up to 10% of its annual phone and broadband revenue.

Ofcom highlighted one complaint where a customer switched to another telecoms company in January but continued to receive bills from TalkTalk. The group demanded almost US$176.39 for services that had been cancelled.

In another case, a Tiscali customer paid the company almost US$978.19 for services it had billed her for but not provided. The customer had cancelled her account with Tiscali in 2006.

TalkTalk has been told by Ofcom to compensate affected consumers by issuing refunds to those who have paid bills since January 1 for cancelled services. It has been instructed to stop debt collection action, withdraw any legal proceedings and take steps to repair the credit ratings of specified consumers.

TalkTalk has apologized for the inconvenience caused to a limited group of former customers. As pet the company, the problems had arisen when moving its customers on to a single billing system, which should be completed by the end of 2010.