Thousands of consumers still pay 'loyalty penalty', say Citizens Advice

By agency reporter
March 27, 2019

Responding to the Financial Conduct Authority {FCA) market study into the mortgages market, Gillian Guy, Chief Executive of Citizens Advice, said: “We welcome the FCA’s new proposals to unshackle mortgage prisoners by helping them move on to cheaper deals. However, hundreds of thousands of people are still paying over the odds simply for being loyal to their provider.

“The FCA says it’s doing more research to work out why customers aren’t switching, but urgent action is needed now. While the FCA drags its feet loyal mortgage customers are being penalised a staggering £1.4 million every day. The FCA must now go much further to protect these customers from paying the loyalty penalty. We want to see concrete action taken to stop loyal customers being ripped off by the end of the year.”

Citizens Advice submitted a super-complaint on the loyalty penalty to the Competition and Markets Authority (CMA) in September 2018 calling for the regulator to consider how the problem can be fixed. The CMA’s response to the super-complaint in December said it agreed and had found damaging practices by firms which exploit unsuspecting customers. The CMA said it wanted to see urgent action.

Research by Citizens Advice found that across five essential markets (mobile, broadband, home insurance, mortgages and savings):

  • British consumers lose £4.1 billion a year to the loyalty penalty (or £11 million a day).
  • Eight in 10 people are paying a significantly higher price, in at least one of the markets, for remaining with their existing supplier.
  • The loyalty penalty is, on average, £877 per year – equal to three per cent of the average household’s total annual expenditure.

This is the fourth super-complaint Citizens Advice has made since being given the power in 2002. Its complaint on payment protection insurance (PPI) in 2005 helped to generate a huge win for consumers, with at least £33.6 billion returned to customers in refunds and compensation so far.

* Citizens Advice https://www.citizensadvice.org.uk/

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