CMA to investigate loyalty penalty super-complaint

The Competition and Markets Authority (CMA) has 90 days to respond to a super-compliant lodged by the Citizens Advice Bureau (CAB) over its concerns that customers are suffering across a variety of sectors as a result of loyalty penalties.

Specifically, the CAB, which lodged the complaint on 28 September, is concerned that loyal customers who stay with their providers of certain products, such as household insurance or mobile phone contracts (often on default or roll over contracts), can end up paying significantly higher rates than new customers who are often enticed with more favourable offers and rewards.

In its complaint, the charity has called on the CMA to "act now to stop people being exploited". its findings expose particular concerns that loyalty penalties are disproportionately being paid by vulnerable customers, such as the elderly and those with mental health issues and this is the area where the CMA has been asked to focus its investigation. In particular the mobile, mortgage, household insurance, savings account and broadband markets have been identified by the CAB for scrutiny.

Super-complaints can be made by a government-designated consumer group and, when made, require the regulator to publicly respond within 90 days to confirm if it believes that there is an issue. Where an issue is confirmed, the regulator must further set out what steps it intends to take.

Although the super-complaint will be handled by the CMA, loyalty penalties have been on the Financial Conduct Authority's (FCA) radar for some time and the financial services regulator has confirmed that it will work closely with the CMA in its investigations.

The CMA will in due course announce what steps it intends to take. Those steps could include opening a market study into one or more of the industries that have been highlighted to it, recommending action by others (such as government or the FCA) or enforcement action under consumer or competition law. The CMA could equally decide that no further action is appropriate.

We will have to await the CMA's response to see what steps will be taken, however businesses that compete in the markets identified by the CAB should be aware that this is an area under review and changes may be soon to follow.


This information is for general information purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. Please contact us for specific advice on your circumstances. © Shoosmiths LLP 2024.



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