Wake up, dozy watchdogs – it’s time to BAN loyalty scams: Citizens Advice chief rages at lack of action on rip-offs
Citizens Advice chief Gillian Guy
At Citizens Advice we stand up for people, but especially for those who need help the most. If we see things that we think are unfair, we point them out and fight to get them fixed.
We have found firms are exploiting their loyal customers to the tune of £4.1 billion a year and we do not think nearly enough is being done to solve this problem.
All of us have received a bill for an essential service – like home insurance – to find it has jumped in price since the year before.
But worryingly, we have found it is more likely to be vulnerable and older people who are less likely to know they are paying more than they should be, and more likely to be paying way over the odds for longer periods.
That is why we submitted a super-complaint on the loyalty penalty in five essential markets – mobile, broadband, home insurance, mortgages and savings – in September last year calling for the Competition and Markets Authority (CMA) to outline how this issue could be fixed.
We are one of a handful of organisations who have the power to submit a super-complaint. It means the regulator, in this case the CMA, has to investigate our concerns and respond within 90 days.
The CMA was clear in its response that charging loyal customers more is not acceptable. It said it wanted to see urgent action and that the relevant regulators – Ofcom and the Financial Conduct Authority – needed to report back on their progress within six months.
That six-month deadline is on Wednesday, and it would be fair to say we are disappointed by the lack of progress so far. We understand that fixing problems like this takes time, but consumers continue to get ripped off every day this is allowed to continue. Citizens Advice has been helping people for 80 years. The insight this gives us means we can raise issues that really affect people and make a difference.
Ofcom has announced that it will make companies send a reminder to their customers when their broadband or phone contract is about to end
Our super-complaint on payment protection insurance in 2005 helped to generate a huge win for consumers, with at least £34.9 billion returned to customers in refunds and compensation so far. Loyal customers now need regulators to stand up for them.
Ofcom has announced that it will make companies send a reminder to their customers when their broadband or phone contract is about to end. But given the scale of the loyalty penalty, we do not think this will solve the problem.
We want Ofcom and the FCA to urgently set out their plans for how they are going to tackle this. They must act to stop firms overcharging loyal customers by so much and make sure vulnerable customers are on the best deal.
We want to see Ofcom ban the mobile loyalty penalty outright. It is completely unacceptable for someone to continue to pay for their handset long after they have paid it off.
In the broadband market, some loyal customers on standard deals are paying more than new customers for superfast broadband, and could be receiving a poorer quality service. This cannot be right – Ofcom must ensure that firms are making sure their customers are on the best deals. Meanwhile, the FCA should require lenders to put vulnerable and low-income customers on to better value mortgage deals.
In the home insurance market, firms are often hiking prices for loyal customers year on year. After five years loyal customers are paying, on average, 70 per cent more than new customers.
The Financial Conduct Authority should urgently consider limiting or banning this practice. It should also quickly confirm the proposal to introduce a ‘basic’ (minimum) savings rate, which it estimates will save customers £300 million a year. The Prime Minister has previously said, ‘companies charging their customers a loyalty penalty should know: we will take action’.
And we may well need Government intervention. If regulators do not move quickly enough, we will be looking for the Government to take swift action and announce new legislation in the upcoming Consumer White Paper. Time is ticking. The Financial Conduct Authority and Ofcom need to step up and show us how they are going to stop companies exploiting their loyal customers and put an end to this systematic scam.
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