CMA takes on 'malicious' loyalty penalty charges affecting millions of UK customers
New data from the CMA (Competitions and Markets Authority) has shown that some companies penalise existing customers by charging them more than new customers.
The findings follow on from the Citizens Advice’s concerns resulting in a ‘super complaint’.
The CMA studied the five markets highlighted by the super-complaint: cash savings; mortgages; household insurance; mobile phone contracts; and broadband. It found there is a total loyalty penalty of around £4bn a year in these markets.
Vulnerable people - including those on a low income and the elderly - could be more at risk of paying the loyalty penalty.
Andrea Coscelli, chief executive of the CMA, said: “Our work has uncovered a range of problems which leave people feeling ripped off, let down and frustrated.
“They shouldn’t have to be constantly ‘on guard’, spending hours searching for or negotiating a good deal, to avoid being trapped into bad value contracts or falling victim to stealth price rises.
“Millions of loyal or vulnerable customers are being taken advantage of each year by firms - and end up paying much more than they should do. This must come to an end.
“That’s why we have today recommended a robust package of reforms. There must be a step change to protect the people being hardest hit, including targeted price caps where necessary.
“Together the CMA, regulators and government must act more promptly and powerfully to hold firms to account, stop them exploiting their customers and restore people’s trust in markets.”
The investigation has uncovered damaging practices by firms, which are said to exploit unsuspecting customers.
Exploitations include year-on-year price rises; exit fees; and difficult processes to cancel contracts or switch to new providers.
Millions of people are said to be affected, and the loyalty penalty is set to rise in several markets.
It has been suggested that immediate action to crack down on such harm to customers should happen immediately. The CMA will be taking forward recommendations to help reduce and/or cease these ‘malicious’ penalties.