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Mortgages one of five sectors targeted by £4bn rip-off super-complaint from Citizens Advice

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  • 28/09/2018
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Charity Citizens Advice (CA) has sent its first super-complaint in seven years to the Competition and Markets Authority (CMA) asserting that customers who stay loyal to their providers are out of pocket by more than £4bn a year.

 

The super complaint covers five key markets including mortgages, mobile, broadband, home insurance and savings with eight out of ten consumers affected by the “loyalty penalty” in at least one market, asserts the paper.

CA research suggests each household is being penalised £877, or three per cent of its annual household expenditure for staying with providers.

The 76-page super-complaint revealed of the five sectors, mortgage customers are the least likely to be penalised with 10% suffering for loyalty against 47% of home insurance or 43% of broadband customer. However, of the average household spend of £3,671 a year on the five services, the mortgage and protection spend is the highest at £2,527, according to research.

Independent government department, the CMA has confirmed it will investigate and publish a response within 90 days, or before the end of the year.

Possible outcomes include making recommendations to government to change regulation, action by sectoral regulators, taking enforcement action, launching a further market study or deciding no action is required.

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.”

A super-complaint, as defined in section 11(1) of the UK’s Enterprise Act 2002, is a grievance concerning the actions of a UK market for goods or services that are ‘significantly harming the interests of consumers.’

The national charity CA lodged the complaint with the hope of triggering a series of market investigations into the widespread overcharging of customers who stay with providers and identified that older or vulnerable customers were most often at risk.

Citizens Advice chief executive Gillian Guy 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.”

 

Price capping

The charity outlined the difference the government’s price cap has made in the energy market which will shortly bring down household bills by an average of £75 a year.

CA analysis showed that excessive prices for loyal customers can be just as high – if not more so – in other markets.

In one example, Citizens Advice helped an elderly couple in their 90s whose daughter went to the charity after finding her parents were paying nearly £1,000 a year too much for home insurance after staying with a company for six years.

The CA said it recognises there is no one-size-fits-all solution, but Guy added: “It’s completely unacceptable that consumers are still being ripped off for being loyal to companies they rely on every single day.

“The loyalty penalty is clearly unfair – 89% of people think it is wrong. The CMA needs to act now to stop people being exploited.”

This is the fourth super-complaint to be lodged by the charity since it gained its power in 2002, which has a record for success on past super-complaints including doorstep selling, payment protection insurance and cold-calling, resulting in changes to the laws governing each sector.

Its complaint on payment protection insurance (PPI) in 2005 has helped return at least £32.2bn to customers in refunds and compensation.

The CMA is inviting interested parties to provide any evidence which may be useful to its assessment.

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