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FCA pushed to take ‘strong action’ where loyal customers are penalised

  • 19/06/2019
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FCA pushed to take ‘strong action’ where loyal customers are penalised
The Financial Conduct Authority (FCA) must recognise the scale of penalties faced by long-standing customers and take “strong action” potentially including price caps, the competition regulator has said.


The Competition and Markets Authority (CMA) added “some progress” had been made in taking forward recommendations on customer loyalty, but said regulators, including the FCA, must do more.

The CMA made the call in its update to the super-complaint into the customer loyalty penalty posted by Citizens Advice last year.

Citizens Advice highlighted five markets where it believes customers who stay with their provider for a long time are penalised. They are mobile, broadband, savings accounts, mortgages and household insurance.

The CMA noted that work by regulators was underway in these five markets to look in more detail at the problems and how they can best be tackled, with key decisions due shortly.

“While it is too soon to assess progress, we expect regulators to take firm action where problems are found,” it said.

“Work by regulators to look at publishing loyalty penalty metrics is underway; but more must be done to take this forward,” it added.


Mortgages and insurance

In the mortgage market specifically, the CMA welcomed the FCA’s work on mortgage prisoners and acknowledged that it was also undertaking further research to understand more about customers who can switch but do not.

However, it encouraged the FCA to look at what other measures may be needed to help or protect these consumers when it understood more about the problems they face.

In insurance, the CMA noted that it appears many longstanding customers are paying more than new customers with prices increasing year after year.

It acknowledged the FCA was looking at these issues as part of its general insurance market study.

“We expect the FCA to look at all feasible options that provide an effective response to address the problems in this market,” it said.


Regulators must recognise the scale

The CMA continued pushing regulators to be aware of the issues and take effective action.

“Regulators need to recognise the scale of the loyalty penalty and its impact in their markets, and to design effective interventions that help those consumers who are most in need, particularly the vulnerable,” it said.

“We expect the FCA and Ofcom to take strong action in their markets where problems are found, including considering targeted price caps where necessary.”


Serious issue

The FCA responded to the CMA’s review by highlighting that it was taking forward remedies and conducting further work in the mortgages market, and that it would publish the interim findings of its general insurance work during the summer.

FCA executive director of strategy and competition Christopher Woolard said: “Before the CMA published its supercomplaint response last year, we had already begun work in the mortgages, cash savings and general insurance markets.

“Ensuring that markets work well for longstanding and vulnerable consumers continues to be a priority for us and the loyalty penalty is a serious issue.

“We will continue to work closely with the CMA and other regulators on the recommendations relevant to us.”


Anti-virus software and video games

The CMA itself has begun enforcement cases investigating harmful business practices in two sectors: anti-virus software and online console video games.

It said it has also set out a framework which gives clarity to businesses about the difference between healthy competition and unacceptable practices, alongside proposals to strengthen consumer law.

It concluded that six months on from its report, “the loyalty penalty continues to be an issue of great concern and we remain committed to working with regulators and government in tackling this exploitative problem”.

“We will continue to look at whether sufficient progress has been made in taking forward our recommendations over the following six months and will publish a further update on progress at the end of the year.”



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