Day: September 27, 2018

• Smart Data Review launched as research published today suggests customers who stay loyal to essential service providers are losing out on £4 billion a year
• the review will look at how we can use technology such as comparison tools and open banking to ensure markets work for consumers, as part of our modern Industrial Strategy

Consumer Minister Kelly Tolhurst has today (Friday 28 September) published details of a new review which will make it easier for consumers to get good deals on essential services like broadband and banking, and put an end to consumers paying unjustifiable ‘loyalty penalties’.

The Smart Data Review will look at speeding up the development of innovative new services such as automatic switching apps to make bills cheaper.

Government wants to ensure that all consumers can benefit from these types of innovative new services, not just those who are digitally savvy and regularly look to switch providers.

The Review will report to the newly established Consumer Forum, chaired by Consumer Minister Kelly Tolhurst, which brings together ministers and CEOs of sector regulators. The government will consult with stakeholders including developers, regulated companies, consumer organisations and charities throughout the review.

Consumer Minister Kelly Tolhurst said:

Britain has long been a world leader in ensuring that markets work in the interests of consumers, but many loyal customers are still paying more than they need to.

The Smart Data Review will enable the development of new technologies to make it easier to access the best deals, and follows tough action we have taken in the energy market through our price cap which will protect over 11 million households from poor value default tariffs this winter.

It is our modern Industrial Strategy in action, ensuring markets provide consumers with keen prices and quality products and services through cutting-edge innovation.

The government’s Modernising Consumer Markets Green Paper highlighted the challenges that consumers face in regulated markets such as financial services, energy and telecoms. For example, consumers can struggle to stay on top of their essential service contracts and find it difficult to identify the best deal, and those that do not switch sometimes pay considerably more.

Today Citizens Advice revealed that customers who stay loyal to their providers are losing out on over £4 billion a year. The Competition and Markets Authority, the UK’s primary competition and consumer authority, is investigating the concerns raised by Citizens Advice.

Citizens Advice research shows the loyalty penalty is disproportionately paid by vulnerable consumers, such as older people and people with mental health issues. These groups are particularly likely to struggle with switching.

In addition to the Smart Data Review, the government is working with regulators to ensure vulnerable consumers are protected by identifying and sharing best practice policies and approaches to vulnerable consumers from across all sectors of the economy.

The Competition and Markets Authority (CMA) will now investigate concerns raised that people who stay with their provider – often on default or roll over contracts – can end up paying significantly more than new customers. Citizens Advice refers to this as a ‘loyalty penalty’.

The super-complaint identifies five ‘essential’ markets where Citizens Advice has concerns about such penalties:

• savings accounts
• mortgages
• household insurance
• mobile
• broadband

Citizens Advice has also asked the CMA to focus on vulnerable customers, who it fears can be hardest hit.

The CMA will now consider the concerns raised, and what should be done about them. This will include engagement with relevant regulators such as the FCA and Ofcom.

It will publish a response within 90 days and possible outcomes include:

• making recommendations to government to change legislation
• action by sectoral regulators
• taking competition or consumer enforcement action
• launching a market investigation or market study
• deciding there is no action required

This list is not exhaustive and there could be more than one outcome depending on the results of the investigation.

Daniel Gordon, Senior Director at the CMA said:

We will now carefully consider the concerns raised by Citizens Advice, and any further evidence on this issue. Our response will set out the CMA’s views on this important issue and any next steps we think are needed to make sure businesses don’t take unfair advantage of their long-standing customers.

The CMA is inviting interested parties to provide any evidence which may be useful to its assessment.

Find out more on the loyalty penalty super-complaint page.

Notes for editors

1. The Enterprise Act 2002 (the Act) makes provision for designated consumer bodies to make super-complaints. A super-complaint, as defined by section 11(1) of the Act, is a complaint submitted by a designated consumer body that ‘any feature, or combination of features, of a market in the United Kingdom for goods or services is or appears to be significantly harming the interests of consumers’. Citizens Advice is a designated consumer body. Within 90 days after the day on which a super-complaint is received, the CMA must say publicly how it proposes to deal with it.
2. In its super-complaint Citizens Advice defines vulnerable consumers as those on low incomes, older people, people with health problems and those with lower levels of formal education.
3. Enquiries should be directed to the CMA’s press team: press@cma.gov.uk, or 020 3738 6460.