Banks and insurers should publish amount loyal customers are overcharged by, MPs demand
BANKS and insurers should be forced to publish how much they’re overcharging loyal customers by, a cross-party group of MPs has said.
The Treasury Select Committee has called on the financial regulator to make firms reveal this premium on an annual basis.
It says this will make households more aware of how much they’re being overcharged by, which in turn could encourage them to switch to a better deal.
In addition, it should motivate firms to slash the amount they’re penalising loyal users by.
The so-called “loyalty premium” sees the average person overpaying by up to £1,440 a year, according to research from Citizens Advice.
That’s a whopping £1,000 a year overspent on mortgages, £60 on home insurance, and £50 on low paying savings accounts, for example.
I was charged £600 a year for my phone, even though my contract had ended
DAD-of-two Juan Askew was left £600 out of pocket after Vodafone continued to charge him the full rate for his phone contract for a year after it ran out.
The marketing guru from Buckinghamshire took out a 24-month contract for an iPhone 6 back in September 2015 and paid £49.95 a month.
But it wasn’t until December 2018 that he realised his contract had ended even though he was still paying the full-whack.
Juan, 50, has been a customer with the network provider for more than seven years and claims he was never alerted by the company to the fact that his contract was up.
“It made me feel sick when I realised,” Juan told The Sun. “They’ve absolutley fleeced me.
“When I called to complain they agreed to move me on to a SIM-only deal which costs £6.99 a month – so why have I been paying nearly £50 a month when my contract was up?
“Why didn’t Vodafone tell me? They knew it was coming to an end so they must have ignored it.
“Technically I own the handset now so I’ve been paying hundreds more for no reason.
“What’s worse is that they don’t proactively get in touch to discuss your options.
“I want the £600 back. It’s the least they can do.”
A spokesperson for Vodafone said: “From April 2018 we have been proactively contacting all customers when they are approaching the end of their minimum term to let them know their options.
“These include upgrading their device or moving to a SIM-only contract so they are not paying anything for a handset.
“We also offer extra data to those customers who don’t opt for either of these alternatives but instead choose to stay on their contract after the end of their minimum term.”
A super-complaint on the issue was lodged by the charity in September 2018 with the Competition and Markets Authority ruling in December that suppliers should divulge the size of their penalty each year.
The CMA also called for price caps to be introduced to protect those worst hit by the extra costs.
But now the Committee is calling on the Financial Conduct Authority (FCA) to act “swiftly” to protect people.
It also wants the FCA to “redouble its efforts to make switching a simpler process” after the FCA said that simply publishing the premium wouldn’t be enough to get consumers to take action.
The Committee said: “Even if many consumers choose to ignore such information, others will not, and the inclusion of such information may motivate firms to make efforts to reduce their loyalty penalty.”
But the Committee’s report doesn’t touch upon energy and telecoms bills where the loyalty premium is also a big problem – and Citizens Advice believes more action is needed.
More on money
The charity found that broadband providers are overcharging loyal users by £110 a year, while it’s £220 a year for mobile customers.
Gillian Guy, chief executive of Citizens Advice, said: “While it’s a good first step to call on banks to report on the size of the loyalty penalty, stronger action is needed to stamp out this bad practice.”
The Sun has asked the FCA for a comment and we’ll update this story if we get one.
The Committee’s report also calls for debt collection letters to be more supportive and less intimidating – and it wants banks to introduce optional spending controls to help vulnerable consumers better manage their money.
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