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Loyalty penalty

We're calling on regulators to tackle the loyalty penalty in essential markets and protect people from being ripped off.

Why things need to change

Across essential services, customers are being penalised for their loyalty - from telecoms to financial services. Huge numbers of customers are on uncompetitive deals, paying far more for a service than a new customer would.

We don't think a customer's loyalty should be penalised. Our 2018 research found there are clear reasons why this penalty should be tackled:

  • The loyalty penalty is widespread.
    • 8 in 10 bill payers are charged significantly higher prices for remaining with their existing supplier in at least one essential market. We estimate that loyalty costs these consumers several billion a year.
  • Customers don't realise they're being penalised for their loyalty, and face obstacles when trying to shop around.
    • Depending on the market, up to 64% of consumers didn't know that loyal customers are charged the same or more than newer customers.
  • Customers in vulnerable situations are disproportionately stung by the penalty.
    • Older, lower income and less educated consumers are more likely to face the loyalty penalty.

What we are doing

In September 2018, Citizens Advice submitted a super-complaint about the £4.1bn loyalty penalty to the Competition and Markets Authority (CMA).

A super-complaint can be made by certain consumer organisations, requiring regulators to investigate markets or market practices that they think are significantly harming the interests of consumers. This was the first time in 7 years that we used these powers as a designated consumer body.

Last December, the CMA agreed with our findings. They recommended that regulators take urgent action, and provide regular updates on what steps they are taking to stop loyal customers from being penalised.

In June 2019, the CMA reported on the progress being taken to tackle the loyalty penalty 6 months after their initial response. Regulators have started to take steps to address the issue, but this is not nearly enough to solve the problem. The Government also committed to ensuring that both they and regulators take further action to tackle these harmful business practices.

We wrote a paper setting out the progress we thought had been made 1 year after submitting the super-complaint. This outlines what regulators had planned, and what measures we expect to be taken by both regulators and government by the end of the year to ensure the loyalty penalty is tackled.

What we’re saying

Read our loyalty penalty policy research:

Read our loyalty penalty blogs: