UK ISP TalkTalk has dodged a regulator’s bullet regarding overcharging customers, but only after coughing up £2.5 million (€2.9 million) in refunds.

Ofcom revealed it was forced to drop the threat of a fine after both firms made the goodwill payments before a mandatory compliance period expired, after ruling the pair had breached domestic telecoms rules by billing thousands of customers for cancelled services.

The regulator gave the ISPs until December 2 to make good on the overcharges or face fines when it announced the outcome of a four month investigation in November.

As the law stands, Ofcom is now unable to fine the pair. However, the regulator revealed that it welcomes proposed changes to the law that would allow it to fine telcos regardless of goodwill payments, hinting at disappointment over the matter.

Most of the customers overcharged were former Tiscali UK subscribers, which TalkTalk acquired when it bought the firm in 2009.

It has spent the past two years integrating those new subscribers into its network, however an apparent delay to the launch of a next-generation billing system in January suggests the process has been anything but smooth.

Chief executive Dido Harding in November said the integration process was on track to be completed by end-2010, and raised the target for synergies achieved to £55 million in the year to end-March.