A super-complaint has been launched by Citizens Advice over the way firms in five different areas exploit their loyal customers.
The charity – who was the first to raise the alarm on the mis-selling of PPI in the early years of this century by raising a similar ‘super-complaint’ in 2005 – says customers remaining loyal to their supplier are being ripped-off to the tune of £4.1 billion a year.
They have highlighted alleged exploitation in savings accounts, mobile phone contracts, mortgages, household insurance and broadband contracts. They allege the average cost is £877 a year per person and that elderly and vulnerable people are ‘disproportionately affected’.
The Competition and Markets Authority (CMA) has said it would ‘now investigate concerns raised that people who stay with their provider — often on default or rollover contracts — can end up paying significantly more than new customers’.
Citizens Advice chief executive, Gillian Guy, said: “It’s completely unacceptable that consumers are still being ripped off for being loyal to companies they rely on every single day.
“As a result of this super-complaint, the CMA should come up with concrete measures to end this systematic scam.”
The charity says British consumers are losing out because of what they call the ‘loyalty penalty’ and quote the example of one elderly couple – both in their 90s – who were paying more than £1,000 a year too much on their home insurance.
It claims 8 out of 10 consumers are paying a ‘significantly higher price’ in one or more of the markets under investigation because they are remaining with their existing supplier.
Said Ms Guy: “It beggars belief that companies in regulated markets can get away with routinely punishing their customers simply for being loyal.
“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 stop people being exploited.”
Banking industry body UK Finance has promised to ‘carefully consider the issues raised’.
Spokesman Eric Leenders said: “We would always encourage customers to shop around and find a deal that best suits their needs and we will continue working with the regulators to make this as easy as possible, including through standard terms and price comparison tools.”
The insurance industry is to ask its members to look at customers who have been with them for more than five years.
Huw Evans, director general of the Association of British Insurers, said: “In a competitive free market, where three out of four people shop around, there is no easy fix available, and these measures will take time to bed in.”
The Financial Conduct Authority (FCA) said it was already concerned about the issue in the insurance market and had started its own study.
Chief executive Andrew Bailey said: “We expect firms to look after the interests of all customers and treat them fairly, whether they are new or long-standing.
“It is important to get the balance right so that existing customers do not miss out on the benefits of competition and innovation, including when they purchase or renew their general insurance products.”
Switching supplier is the advice often given to people who believe they are being charged too much for a service.
Richard Neudegg, head of regulation at uSwitch.com, said: “If, as a customer, you feel you’re paying too much for a service, don’t accept the offer – pick up the phone or search online and you’ll almost certainly be able to find a much better deal.”
The CMA now has 90 days to respond to the super-complaint, outlining its ideas for how to tackle the issues.
Spokesman Daniel Gordon said: “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.”