Overcharging consumers in a cost-of-living crisis: The loyalty penalty 4 years on

Overcharging consumers in a cost-of-living crisis: The loyalty penalty 4 years on 1.07 MB

We first sounded the alarm on the loyalty penalty - the practice of overcharging customers who don’t switch deals regularly - back in 2018. We submitted a super-complaint to the Competition and Markets Authority (CMA) after finding that consumers were being overcharged by £4bn per year for essential services.

Since then progress has been made in some markets, but we’ve found that 1 in 7 people are still overpaying for their mortgage, broadband or mobile contracts. 

It is unacceptable that consumers are still being charged the loyalty penalty, costing millions that could help them manage soaring energy bills or put food on the table. 

We’re  calling on regulators - FCA and Ofcom - to take action to stop companies from overcharging people when they’re struggling to make ends meet:

  • The FCA should explore alternative models to high Standard Variable Rates at the end of fixed terms, so that consumers are not overcharged for their mortgages.

  • Ofcom needs to work with firms to end the practice of charging customers for mobile handsets that they already own.

  • In broadband, Ofcom should take further steps to make sure no loyal customers overpay for their broadband.