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Citizens Advice issues super-complaint as loyal customers continue to be penalised by over £4 billion a year

28 September 2018

Citizens Advice has revealed customers who stay loyal to their providers are losing out on over £4 billion a year.

The national charity has today lodged a super-complaint with the Competition and Markets Authority (CMA), calling for the regulator to outline how the problem can be fixed.

The practice of overcharging loyal customers is widespread and Citizens Advice has repeatedly warned that loyal consumers are being ripped off.

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.
  • 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.

“It beggars belief that companies in regulated markets can get away with routinely punishing their customers simply for being loyal. As a result of this super-complaint, the CMA should come up with concrete measures to end this systematic scam' says Citizens Advice Chief Executive Gillian Guy.

The Government’s price cap in the energy market will bring down loyal customers’ bills by £75 per year on average. Citizens Advice analysis shows that excessive prices for loyal customers can be just as high - if not more so - in other markets.

The charity also found the loyalty penalty is disproportionately paid by vulnerable consumers, such as older people and people with mental health issues. These groups are particularly likely to struggle with switching.

In one example, Citizens Advice helped an elderly couple whose daughter went to the charity after finding her parents were paying nearly £1000 a year too much on their home insurance. The couple, who are both in their 90s, had been with the same company for 6 years and over that time their premium had continually risen.

This is the fourth super-complaint Citizens Advice has made since being given the power in 2002. Their complaint on payment protection insurance (PPI) in 2005 helped to generate a huge win for consumers, with at least £32.2 billion returned to customers in refunds and compensation so far.

Citizens Advice have identified the scale of the problem in 5 essential markets - but it knows loyal customers are penalised elsewhere too. By submitting this complaint the organisation is asking the CMA to investigate all markets where the loyalty penalty exists. Because the sectors are so diverse there is no one-size-fits-all solution. The CMA will need to work closely with other regulators and the Government to ensure the right action is taken in each market.

Gillian Guy, Chief Executive of Citizens Advice, said:

“It’s completely unacceptable that consumers are still being ripped off for being loyal to companies they rely on every single day.

“Regulators and Government have recognised the loyalty penalty as a problem for a long time - yet the lack of any meaningful progress makes this super-complaint inevitable.

“The Government’s price cap in the energy market will protect some loyal customers. However, there’s still a long way to go in other sectors.

“The loyalty penalty is clearly unfair - 89% of people think it is wrong. The CMA needs to act now to stop people being exploited.”

Notes to editors

A super-complaint can be made by a designated group of consumer organisations on a specific issue.  The complaint is a request to the CMA or other specified regulator to investigate an issue or a market that the consumer body believes is working against the consumer interest.  The CMA or other specified regulator is required to publicly respond to a super-complaint within 90 days to say whether:

  • they believe it is an issue – if not, why not

  • how they intend to deal with it.

This is the fourth super-complaint to be lodged with by Citizens Advice since the new powers designed to end market abuses were introduced in 2002. The first was about doorstep selling and triggered an Office of Fair Trading (OFT) investigation. The super-complaint led to the law being changed to give consumers rights to cancel both solicited and unsolicited doorstep selling. The second, in 2005, was about payment protection insurance (PPI). This complaint led to changes including a ban on the sale of single premium PPI (when the entire cost of insurance is incurred upfront)with unsecured loans and improved complaints handling. The third, in 2011, was about cold calling and the upfront fees charged by companies offering to find loans for people with poor credit histories. The OFT developed new regulatory guidance and took enforcement action against  the worst offenders. The CMA replaced the OFT in 2014.

  1. The loyalty penalty is the difference between what loyal and new consumers pay for the same service

  2. To estimate the number of people likely to be paying the loyalty penalty across these 5 markets, Citizens Advice conducted a nationally representative survey of 3,030 adults responsible for household bills in Great Britain. The survey was conducted by ComRes on behalf of Citizens Advice, and fieldwork was carried out between 18-25 July 2018. Data was weighted to be representative of the GB population. Data about the respondent’s gender, age, household income, level of education, mental health, region, housing tenure and ethnic group were also recorded. Comres is a founder member of the British Polling Council and abides by its rules.

  3. Citizens Advice used a combination of polling data, desk research and analysis of data published by the Bank of England and the FCA to calculate the total cost of the loyalty penalty.

  4. The Loyalty Penalty Cross Sector Report can be found here
  5. The £32.2 billion PPI refunds and compensation figure is from the Financial Conduct Authorities monthly statistics from January 2011 - July 2018

  6. Citizens Advice is made up of a network of local Citizens Advice in England and Wales, all of which are independent charities, the Citizens Advice consumer service and the national charity Citizens Advice.

  7. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers.

  8. Citizens Advice is the statutory consumer advocate for energy and postal markets. We provide supplier performance information to consumers and policy analysis to decision makers.

  9. The Citizens Advice Witness Service provides free and independent support for both prosecution and defence witnesses in every criminal court in England and Wales.

  10. Citizens Advice also offers Pension Wise appointments at 500 locations across England and Wales.

  11. The advice provided by the Citizens Advice service is free, independent, confidential and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.

  12. To get advice online or find your local Citizens Advice in England and Wales, visit citizensadvice.org.uk 

  13. You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers.

  14. We helped 2.6 million people face to face, over the phone, by email and webchat in 2017-18. For full service statistics see our monthly publication Advice trends.

  15. Citizens Advice service staff are supported by more than 23,000 trained volunteers, working at over 2,500 service outlets across England and Wales.