Citizens Advice response to Ofcom’s announcement on end of contract notifications

In response to Ofcom’s announcement on end of contract notifications Gillian Guy, Chief Executive of Citizens Advice, said:

“We are encouraged that Ofcom will make companies send a reminder to their customers when their contract is about to end. But, given the scale of the loyalty penalty, this won’t be enough to solve the problem.

“Almost 9 in 10 people think that charging loyal customers more is unfair, and we agree.

“The CMA was clear in its response to our super-complaint that regulators must report on their progress by June. We look forward to hearing about the concrete actions Ofcom will take to end this systematic scam.”

Background:

Citizens Advice submitted a super-complaint on the loyalty penalty to the CMA in September 2018 calling for the regulator to consider how the problem can be fixed. The CMA’s response to our super-complaint in December said it agreed and had found damaging practices by firms, which exploit unsuspecting customers. The CMA said it wanted to see urgent action.

Research by Citizens Advice found that across 5 essential markets (mobile, broadband, home insurance, mortgages and savings):

• British consumers lose £4.1 billion a year to the loyalty penalty (or £11 million a day).

• 8 in 10 people are paying a significantly higher price, in at least one of the markets, for remaining with their existing supplier.

• The loyalty penalty is, on average, £877 per year - equal to 3% of the average household’s total annual expenditure.

• The loyalty penalty for broadband is, on average, £113 per year

• The loyalty penalty for mobile is, on average, £264 per year

This is the fourth super-complaint Citizens Advice has made since being given the power in 2002. Its complaint on payment protection insurance (PPI) in 2005 helped to generate a huge win for consumers, with at least £34.4 billion returned to customers in refunds and compensation so far.

For more information contact: Laura Albrey

Tel: 07977 045 587 or 030 0023 1313

Out-of-hours contact number: 0845 099 0107

Notes to editors

1. In September 2018 Citizens Advice made a super-complaint to the Competition and Markets Authority (CMA).

2. The CMA responded to our super-complaint in December 2018.

3. Our Loyalty Penalty Cross Sector Report is available on our website.

4. The £34.4 billion PPI refunds and compensation figure is from the Financial Conduct Authority’s monthly statistics from January 2011 - February 2019.

5. Citizens Advice includes the national charity; the network of independent local Citizens Advice charities across England and Wales; the Citizens Advice consumer service; and the Witness Service.

6. Citizens Advice is the statutory consumer advocate for energy and post. We provide supplier performance information to consumers and policy analysis to decision makers.
7. The Citizens Advice Witness Service provides free, independent support for prosecution and defence witnesses in every criminal court in England and Wales.
8. Citizens Advice offers Pension Wise services at 500 locations in England and Wales.
9. Citizens Advice’s services are free, independent, confidential and impartial, and available to all regardless of race, gender, disability, sexual orientation, religion, age or nationality.
10. To get advice online or find your local Citizens Advice, visit citizensadvice.org.uk
11. For consumer advice, call the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 to talk in Welsh.
12. We helped 2.6 million people face to face, by phone, email and webchat in 2017-18. For service statistics see our monthly publication Advice trends.
13. Citizens Advice staff are supported by over 23,000 trained volunteers, working at over 2,500 locations in England and Wales.