Customer loyalty rip off – Citizens Advice issues super-complaint, UK

Citizens Advice issues a super-complaint regarding customer loyalty rip-offs in the UK. According to the UK charity, customers who remain loyal are losing out on more than £4 billion each year.

Citizens Advice is a network of 316 independent charities across the United Kingdom. The network gives free, confidential advice and information to assist people with legal, consumer, money, and other problems.

Citizens Advice is calling for the CMA to carry out an investigation and put forward recommendations. CMA stands for the Competition and Markets Authority.

The CMA is a non-ministerial UK government department that is responsible for strengthening business competition. It is also responsible for reducing and preventing anti-competitive activities.

Citizens Advice says that the practice of overcharging loyal customers is widespread. It has repeatedly warned that companies are ripping off these customers. A rip-off is something that costs much more than it is worth.

Citizens Advice says loyal customers being ripped off
In its super-complaint to the CMA, Citizens Advice accuses companies in several markets of ripping off loyal customers.

CMA acknowledges super-complaint

The CMA has acknowledged receipt of the super-complaint from Citizens Advice. The CMA says it will publish a response within ninety days. Possible outcomes include:

– Recommending that the government introduce new laws.

– Recommend action by sectoral regulators.

– Take consumer or competition enforcement action.

– Launch a market study or market investigation.

– Decide that nothing needs to be done.

Regarding the super-complaint, Daniel Gordon, Senior Director at the CMA, said:

“We will now carefully consider the concerns raised by Citizens Advice, and any further evidence on this issue.”

“Our response will set out the CMA’s views on this important issue and any next steps we think are needed to make sure businesses don’t take unfair advantage of their long-standing customers.”

Customer loyalty

Companies launch loyalty programs that reward customers for additional purchases or staying with them. In other words, to encourage customer loyalty.

Businesses can boost customer loyalty by maintaining low prices. They can also offer regular loyalty discounts, special offers, and multi-purchase deals.

Citizens Advice research

Citizens Advice’s research found the following across five major markets (savings, mortgages, home insurance, broadband, and mobile):

– Consumers in the UK lose £4.1 billion annually to the loyalty penalty.

– In at least one of the markets, 80% of consumers are paying a significantly higher price for staying with their current supplier.

– On average, the loyalty penalty is £877 annually. This represents three percent of the annual expenditure of an average British household.

Gillian Guy, who is Chief Executive of Citizens Advice, said:

“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.”

Problem exists in other markets

Loyal customer’s bills will decline by (average) £75 annually thanks to the Government’s price cap in the energy market.

The consumer charity’s analysis shows that sky-high prices for loyal customers can be equally as high in other markets. In fact, sometimes they are even higher.

Citizens Advice also discovered that the loyalty penalty is disproportionately paid by vulnerable individuals. Older adults and people with mental health issues, for example, are vulnerable. Vulnerable customers, especially, find it hard to struggle when switching.

Citizens Advice helped an elderly couple after their daughter discovered they had been paying £1000 too much for home insurance. The husband and wife, both in their nineties, had been loyal customers for six years. Their premium had continually risen over that period.

This is Citizens Advice’s fourth super-complaint since 2002. In 2005, their complaint on PPI helped generate a massive win for customers. PPI stands for payment protection insurance. Customers have so far received £32.2 billion in refunds and compensation.

‘It’s unacceptable’

Ms. Guy 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.”