UK companies face action on ‘loyalty penalty’

Bloomberg

Providers in the UK’s markets for cash savings, mortgages, insurance, mobile phone contracts and broadband are burdening customers with a “loyalty penalty” of around 4 billion pounds ($4.4 billion) a year, the Competition and Markets Authority said.
Vulnerable people, including the elderly and those on a low income, may be more at risk of overpaying for key financial services that comes staying with the same bank or insurance provider for a long time, the UK competition watchdog said in a statement on Wednesday.
The CMA received a “super-complaint” in September by Citizens Advice about a possible “loyalty penalty” for customers in five areas, including savings accounts, mortgages and household insurance, prompting the review. “Our work has uncovered a range of problems which leave people feeling ripped off, let down and frustrated,” said Andrea Coscelli, the CMA’s chief executive. “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.”
The CMA made recommendations to regulators and government to help stop the practice. These include: Using enforcement and regulatory powers to clamp down on harmful practices that stop people getting better deals. Setting out clearly the principles businesses across all markets should follow, such as people being able to leave a contract as easily as they enter it.
The CMA will also be looking at whether consumer law should also be reinforced. Firms should be publicly held to account for charging existing customers much more; regulators should publish the size of the loyalty penalty in key markets and for each supplier on a yearly basis.