Citizens Advice response to Ofcom’s findings on loyalty penalty in broadband market

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Citizens Advice response to Ofcom’s findings on loyalty penalty in broadband market

Friday 27 September 2019

Citizens Advice submitted a super-complaint on the loyalty penalty – in the mobile, broadband, home insurance, mortgages and savings markets – to the CMA in September 2018 calling for it to consider how the problem can be fixed.

The CMA’s response to our super-complaint, in December 2018, said it agreed and had found damaging practices by firms which exploit unsuspecting customers, and said it wanted to see urgent action.

The CMA stated it would report back on whether sufficient progress has been made by individual regulators in tackling the loyalty penalty in December 2019. It will also consider what next steps are necessary, including whether to conduct its own market study.

Research in 2018 by Citizens Advice found that across five essential markets (mobile, broadband, home insurance, mortgages and savings):

  • British consumers lose around £4 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.

This is the fourth super-complaint Citizens Advice has made since being given the power in 2002. Its super-complaint on payment protection insurance (PPI) in 2005 helped to generate a huge win for consumers, with at least £36 billion returned to customers in refunds and compensation so far.

Gillian Guy, Chief Executive of Citizens Advice said:

“Our super-complaint, submitted a year ago, found that loyal broadband customers lose over £1 billion a year. Ofcom has today confirmed that finding.

“The fact that 43% of all vulnerable customers are out-of-contract means that Ofcom needs to tackle this problem urgently.

“While we welcome today’s announcement, it’s unlikely that voluntary, piecemeal commitments from providers will address the sheer scale of the challenge we’ve identified.

“It’s vital that we see stronger, faster action in the broadband market before the Competition and Markets Authority report back in December on progress since our super-complaint. If this fails to happen, we expect them to conduct a market study to ensure loyal customers can get a fair deal once and for all.”