Citizens Advice has launched a super-complaint with the Competition and Markets Authority (CMA) calling for the ‘loyalty penalty’ currently paid by consumers in the mortgage market to be remedied.
In a statement released this morning (28 September), the charity claimed the practice of overcharging loyal customers in comparison to their new counterparts was "widespread" - reporting that loyal consumers lost £4.1bn a year in Britain across five markets: mortgages, savings, home insurance, broadband and mobile.
Citizens Advice chief executive Gillian Guy called on the CMA to find "concrete measures to end the systematic scam" of loyalty penalties.
She said: "It beggars belief that companies in regulated markets can get away with routinely punishing their customers simply for being loyal."
A super-complaint can be made by a designated group of consumer organisations to a regulator, on which a public response is required within 90 days - this is the fourth super-complaint made by Citizens Advice on a consumer issue.
In its super-complaint the charity found the loyalty penalty to disproportionately fall on vulnerable consumers who may struggle to switch rates.
Ms Guy said: "It is completely unacceptable that consumers are still being ripped off for being loyal to companies they rely on every single day.
"Regulators and government have recognised the loyalty penalty as a problem for a long time - yet the lack of any meaningful progress makes this super-complaint inevitable."
In response to the super-complaint, the Financial Conduct Authority (FCA) issued a statement in support of the charity’s concern - identifying the issue as a cause for concern for some time.
In its mortgage market study published in May, the FCA identified a number of actions to be taken to ensure consumers find the best-priced mortgage deal and pledged help to longstanding "mortgage prisoners" unable to switch to a better deal.
Andrew Bailey, chief executive at the FCA, said the regulator intends to work closely with the CMA to investigate the complaint.
He said: "We expect firms to look after the interests of all customers and treat them fairly, whether they are new or long-standing.
"It is important to get the balance right so that existing customers do not miss out on the benefits of competition and innovation, including when they purchase or renew their general insurance products."
The FCA is to launch a general insurance market study to investigate how customers are charged for home and motor insurance, with the terms of reference for the study expected to be published in the next few weeks.
In an initial statement, Eric Leenders, managing director of personal finance at UK Finance, said the trade body intends to consider the issues raised by Citizens Advice and respond in due course.
He said: "The industry has already implemented a number of measures to further improve competition in the mortgages and savings market, including communicating more clearly with savers about the rates they receive and helping longstanding mortgage borrowers switch to a better deal.
"We would always encourage customers to shop around and find a deal that best suits their needs and will continue working with the regulators to make this as easy as possible, including through standard terms and price comparison tools."
rachel.addison@ft.com
