The massive loyalty penalty CMA investigation – deemed a ‘super complaint’ – has resulted in a set of reforms to stop the issue affecting people.
The investigation found “damaging practices by firms, which exploit unsuspecting customers”. This issue is estimated to equate to a cost to the consumer in the region of £4bn per year. There are thought to be millions of people affected by loyalty penalties.
The loyalty penalty CMA investigation looked at five markets: savings; insurance; mortgages; mobile phone contracts; and broadband. New regulatory rules are set to be introduced to stamp out the loyalty penalty endemic.
About the loyalty penalty CMA ‘super complaint’
In short, the loyalty penalty CMA investigation that’s classed as a ‘super complaint’ is about companies penalising people for loyalty. Customers who have been there a long time are being charged more than new customers, who are often attracted by short-term offers.
Not only that, but some companies have costly exit fees, hidden price hikes, and some make the cancellation processes difficult for the consumer. The aim, it seems, is to keep the consumer with the company while charging them more.
The CMA has called firms out for using damaging practices to exploit their customers. The elderly and people on low incomes are said to be hit the hardest.
What the loyalty penalty CMA investigation means now
The loyalty penalty CMA investigation has led to recommendations for regulators and the government to stop people being exploited.
These include:
- Stopping practices that prevent people getting better deals;
- Allowing customers to be able to leave contracts easily;
- Punishments for loyalty penalty charges;
- Price caps;
- Forced price reductions at the end of contract terms;
- Pricing interventions.
Ultimately, any behaviours that are in breach of competition law or consumer law must be stopped. The ‘super complaint’ from the loyalty penalty CMA investigation has highlighted an area where people are being intentionally exploited. This must stop.
In a statement about the recent developments in the loyalty penalty CMA reviews, the regulators said:
“Our work has uncovered a range of problems which leave people feeling ripped off, let down and frustrated. They shouldn’t have to be constantly ‘on guard’, spending hours searching for or negotiating a good deal, to avoid being trapped into bad value contracts or falling victim to stealth price rises.
Millions of loyal or vulnerable customers are being taken advantage of each year by firms – and end up paying much more than they should do. This must come to an end.”