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Citizens Advice calls for regulators to take action as it reveals loyalty can cost customers nearly £1,000 per year

1 Chwefror 2018

Customers who stay loyal to their essential service providers could be paying £987 more per year - equivalent to four months’ worth of food for the average household - new research from Citizens Advice reveals.

The report found that charging loyal customers more than new customers for the same service is a common practice across six key markets: energy, mobile, broadband, home insurance, fixed rate mortgages and savings accounts.

Yet a new survey shows more than 9 in 10 people said they think providers of essential services should charge loyal customers the same or less than new customers.

Citizens Advice is calling on regulators to set targets to reduce the number of people who pay the loyalty penalty, and investigate solutions for vulnerable customers.

It is also calling on the Competition and Markets Authority to investigate the cross-cutting impact of the loyalty penalty, with a focus on vulnerable consumers.  

Citizens Advice has found evidence across all six markets that providers use unfair tactics that take advantage of consumers’ behaviours and deter them from finding a better deal. This includes contracts with complex terms and conditions, lack of notice when a contract ends, and financial barriers to exit a contract.

The most susceptible group to pay a higher price for the same service because of their loyalty in all six markets analysed by Citizens Advice were people aged 65 and older. Other affected groups included those people on low incomes or without a university education.

Gillian Guy, Chief Executive of Citizens Advice, said:

“It is unacceptable that consumers who stick with their existing provider of important services like energy and broadband are being penalised for their loyalty.

“Companies routinely use tactics that take advantage of human behaviour - and regulators are letting them get away with it.

“That’s why regulators need to take action by setting targets to reduce the number of loyal customers who pay over the odds, and investigating solutions for vulnerable customers.

“The upcoming Consumer Green Paper is an opportunity for government to show they are on the side of the consumer by protecting them from unfair practices that exploit their loyalty.”

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Notes to editors

  1. £987 is equivalent to four months’ worth of food for the average UK household, calculated using: ONS, Family Spending in the UK: financial year ending March 2016, released February 2017.
  2. The Citizens Advice service comprises a network of local Citizens Advice, all of which are independent charities, the Citizens Advice consumer service and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more see the Citizens Advice website.
  3. The advice provided by the Citizens Advice service is free, independent, confidential and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.
  4. To get advice online or find your local Citizens Advice in England and Wales, visit citizensadvice.org.uk
  5. You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers.
  6. Local Citizens Advice in England and Wales advised 2.5 million clients on 6.2 million problems in 2014/15. For full service statistics see our publication Advice trends.
  7. Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 2,500 service outlets across England and Wales.