Probe into £4billion bills rip-off for loyal customers

‘Systematic scam needs to end’

AN inquiry has been launched into a ‘penalty for loyalty’ that costs households more than £4billion a year on everything from insurance, home loans and savings to broadband and mobile phone services.

Millions of people who stay with suppliers of essential services for any length of time are being punished with much higher bills than new customers, according to an investigation by Citizens Advice.

And today, the Government’s Competition & Markets Authority (CMA) is announcing a formal probe into a so-called super-complaint brought by the charity. It will look at five markets – household insurance, savings accounts, mortgages, broadband services, and mobile phone contracts.

Research by Citizens Advice suggests the combined cost of being loyal to the companies providing their services runs to £4.1billion a year – as much as £877 a year for a household.

Previously, the CMA has found that customers who remained loyal to their energy company and were sitting on a standard variable tariff were effectively overpaying by £1.4billion a year. It has recently announced a price cap, which will cut the annual bill by an average of £75. Now the CMA will investigate whether concerns about a loyalty penalty in these other sectors are justified.

Citizens Advice chief Gillian Guy said nine in ten people believe it is wrong to charge long-standing customers more, particularly as many of them are elderly or vulnerable.

She 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.’

The debt charity’s claims are included in its report ‘The cost of loyalty’, which is based on a representative survey of thousands of bill payers during 2017.

On home loans, it said someone on a standard variable rate mortgage typically pays £439 a year more than a new customer who has a two-year fixed-rate deal. However, recent research by MoneyMail suggests the difference could run to more than £4,000 a year. Citizens Advice said people who automatically renew household insurance, rather than shop around, typically pay £13 a year more. Meanwhile, research published by the Daily Mail last year suggested the loyalty penalty across all forms of household and motor insurance could add up to £1,000 a year.

Citizens Advice said interest rates paid to long- standing savings account customers with cash ISAs were lower than those available to new customers.

As a result, it puts the loyalty penalty at £48 a year.

The penalty on broadband services is put at £113 for every year that households stay with a supplier after their initial contract period ends. It says this is typically 43 per cent higher than bills paid by new customers. And it estimates the penalty on mobile phone contracts is £264, based on millions continuing to pay a high monthly charge even after paying off handset costs.

The report concluded: ‘Loyal customers are seen as cash cows. Anybody that is not on the internet, is elderly, sick or poor gets charged a lot more than new customers.’

Senior director at the CMA, Daniel Gordon, said: ‘We will now carefully consider the concerns raised by Citizens Advice, and any further evidence on this issue.’

The Association of British Insurers admitted: ‘The insurance industry recognises this is a problem and earlier this year became the first and only sector to take voluntary, industry-wide action to tackle it.’ UK Finance, which speaks for banks and building societies, said: ‘We would always encourage customers to shop around and find a deal that best suits their needs and will continue working with the regulators to make this as easy as possible...’

IT was once a sacred tenet of business that loyal customers should be cherished and rewarded for their allegiance.

Today that principle has been actively reversed, with many large companies deliberately penalising their most faithful patrons so they can offer cut- price contracts to new clients. So we welcome the Competition and Markets Authority investigation into this shady practice, focusing on insurance, mortgage and savings, broadband and mobile phone charges.

Citizens Advice – which prompted the probe with a ‘super-complaint’ – estimates that loyal customers are being overcharged by £4billion a year, with the elderly and vulnerable most at risk because they are least likely to shop around online.

This is a cruel, cynical deception. It must be stopped. THE Mail applauds the decision of the banks to introduce new checks aimed at preventing customers falling prey to account fraudsters. But it’s hugely disappointing that they still refuse to guarantee that victims will be reimbursed. Given that the five big banks alone made £9billion profit in just three months and the total cost of refunding fraud victims is estimated at just £200million, is it really too much to ask that they should bear the cost? They can afford it – their customers often can’t.