Citizens Advice calls for Three to stop ripping off its loyal customers

19 September 2019

Customers of Three Mobile who are being penalised for their loyalty will continue to be overcharged by between £1.5 and £2.7 million a month, reveals Citizens Advice.

The charity is calling for Three to join the other major mobile providers, who agreed to voluntary commitments in July to better protect loyal customers.

These measures, which will reduce many loyal customers’ bills, are due to come into effect by February.

But Three have so far refused to commit to taking similar action, which Citizens Advice says will result in some of its loyal customers continuing to be overcharged.

The charity has long campaigned to end the loyalty penalty - the difference between what loyal and new consumers pay for the same service.

In the mobile sector this is because customers continue to be charged for the handset at the end of a minimum contract period when they’ve already paid it off.

Using publicly available data, Citizens Advice found:

Between 154,000 and 210,000 Three customers are paying the loyalty penalty each month
On average, a Three customer paying the loyalty penalty is being penalised by £10 to £13 each month
Over the course of a year, loyal Three customers are being overcharged by between £18 million and £32.4 million

While some Three customers benefit from being out-of-contract, Citizens Advice is concerned by the number of its customers who are still being penalised when their contract ends.

Citizens Advice is calling for Three to commit to stop overcharging all their out-of-contract customers.

Three signed up to Ofcom’s fairness commitments earlier in the year, promising the regulator that it would give customers a fair deal. By continuing to rip off customers paying a loyalty penalty, Citizens Advice argues they have broken this promise. The charity warns that, if this breach continues, Ofcom must make sure Three are standing by their commitment.

The loyalty penalty isn’t just a problem in the mobile industry. Citizens Advice submitted a super-complaint across five markets (mobile, broadband, home insurance, mortgages and savings) in September last year. The charity had found that loyal customers were being penalised by around £4 billion every year simply for staying with their provider.

The charity is also calling for details of the concrete action regulators will be taking to tackle the loyalty penalty across the other four markets by the end of the year.

Gillian Guy, Chief Executive of Citizens Advice, said:

“It’s unacceptable that Three still thinks it can penalise its loyal customers by over a million pounds every month. It cannot continue to bury its head in the sand.

“While Three claims in its adverts that “phones are good”, its customers may find their experience anything but, as their provider falls behind in refusing to end this practice.

“We’re pleased other mobile providers have said they’re going to act, but they must now follow through on their promises and put them into effect by early next year.

“All eyes will be on Three to see if it puts this right and agrees to stamp out the loyalty penalty.”

Stu from Merseyside, who called the Citizens Advice Consumer Service for help, said:

“I’ve been with Three for over 10 years and, across my family, have five contracts with them. Each time one of the contracts ends I always seem to be paying more.

“I finished paying off one of my handsets and was shocked to find out Three were still charging me for it. I now make sure I always sign up to a new contract when my old one ends to try and get a better deal, as they never just tell you about their deals or discounts that are available."

“I think they should be rewarding loyal customers like me. I shouldn’t have to keep an eye on my bills to make sure I am not being overcharged.”

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BACKGROUND:

Citizens Advice submitted a super-complaint on the loyalty penalty - in the mobile, broadband, home insurance, mortgages and savings markets - to the CMA in September 2018 calling for it 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 in 2018 by Citizens Advice found that across five essential markets (mobile, broadband, home insurance, mortgages and savings):

British consumers lose around £4 billion a year to the loyalty penalty (or £11 million a day).
Eight in 10 people are paying a significantly higher price, in at least one of the markets, for remaining with their existing supplier.

This is the fourth super-complaint Citizens Advice has made since being given the power in 2002. Its super-complaint on payment protection insurance (PPI) in 2005 helped to generate a huge win for consumers, with at least £36 billion returned to customers in refunds and compensation so far.

Notes to editors

1. Citizens Advice conducted analysis of data published in Ofcom’s statement and consultation Helping consumers to get better deals in communications markets: mobile handsets . Ofcom requested data from providers about all of their bundled tariff customers who were out-of-contract in November 2018, and compared the monthly price paid by each customer to an equivalent SIM-only tariff with the same provider.

2. Ofcom published partially redacted results, giving approximate figures for how many customers could save money with each provider, and estimates of how much they could save by. Citizens Advice used these figures to calculate a range of estimates for the loyalty penalty paid by Three customers by using the lowest and the highest figures in these ranges. Not all customers could save money by switching, so we excluded these customers from our analysis.

3. Ofcom found that the length of time customers remain out-of-contract is broadly stable over time and therefore derived monthly overpayments from their November 2018 data request. Citizens Advice multiplied Ofcom’s monthly overpayment for Three by 12 to arrive at its annual figure.

4. Ofcom’s mobile fairness commitments release can be found here

5. The loyalty penalty super-complaint can be found here.

6. The CMA’s press response to the super-complaint can be found here.

7. The Loyalty Penalty Cross Sector Report can be found here.

8. The PPI figure is sourced from the FCA.

9. Citizens Advice includes the national charity; the network of independent local Citizens Advice charities across England and Wales; the Citizens Advice consumer service; and the Witness Service.

10. Citizens Advice’s services are free, independent, confidential and impartial, and available to all regardless of race, gender, disability, sexual orientation, religion, age or nationality.

11. To get advice online or find your local Citizens Advice, visit citizensadvice.org.uk

12. For consumer advice, call the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 to talk in Welsh.

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

14. Citizens Advice staff are supported by over 23,000 trained volunteers, working at over 2,500 locations in England and Wales.