Charging loyal customers more is unfair

We’ve all been locked into phone contracts which are unfair. Pries go up (inflation) but when we reach the end of our contract, we are not offered the best deals. Loyalty is abused not rewarded. To this end, Citizens Advice submitted a super-complaint on the loyalty penalty to the CMA in September 2018 calling for the regulator to consider how the problem can be fixed. The CMA’s response to the super-complaint in December said it agreed and had found damaging practices by firms, which exploit unsuspecting customers. The CMA said it wanted to see urgent action.

Research by Citizens Advice found that across 5 essential markets (mobile, broadband, home insurance, mortgages and savings):

  • British consumers lose £4.1 billion a year to the loyalty penalty (or £11 million a day).

  • 8 in 10 people are paying a significantly higher price, in at least one of the markets, for remaining with their existing supplier.

  • The loyalty penalty is, on average, £877 per year – equal to 3% of the average household’s total annual expenditure.

  • The loyalty penalty for broadband is, on average, £113 per year

  • The loyalty penalty for mobile is, on average, £264 per year

This is the fourth super-complaint Citizens Advice has made since being given the power in 2002. Its complaint on payment protection insurance (PPI) in 2005 helped to generate a huge win for consumers, with at least £34.4 billion returned to customers in refunds and compensation so far.

In response to Ofcom’s announcement on end of contract notifications Gillian Guy, Chief Executive of Citizens Advice, said:

“We are encouraged that Ofcom will make companies send a reminder to their customers when their contract is about to end. But, given the scale of the loyalty penalty, this won’t be enough to solve the problem.

“Almost 9 in 10 people think that charging loyal customers more is unfair, and we agree.

“The CMA was clear in its response to our super-complaint that regulators must report on their progress by June. We look forward to hearing about the concrete actions Ofcom will take to end this systematic scam.”

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