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‘Loyalty penalty’ costs Brits £1,000 a year

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Loyalty doesn't pay and it can cost customers nearly £1,000 per year, according to research by Citizens Advice.

The consumer group called on the regulator to take action, as its research showed customers who stay loyal to their essential service providers could be paying £987 more per year. It wants consumer regulators to set targets for the number of people paying ‘the loyalty penalty’.

Companies routinely charge loyal customers more than new customers for the same service across six key markets: energy, mobile, broadband, home insurance, fixed rate mortgages and savings accounts.

This runs contrary to the public’s view, which shows that nine in 10 people believe they should be rewarded for loyalty, with loyal customers charged the same or less than new customers.

The group found evidence across all six markets that providers use unfair tactics, including finding ways to deter them from finding a better deal. This includes contracts with complex terms and conditions, lack of notice when a contract ends, and financial barriers to exit a contract.

Citizen’s Advice also called on the Competition and Markets Authority to investigate the cross-cutting impact of the loyalty penalty, with a focus on vulnerable consumers. It found that older customers are more likely to pay a higher price for the same service because of their loyalty.

Gillian Guy, chief executive of Citizens Advice, said: “It is unacceptable that consumers who stick with their existing provider of important services like energy and broadband are being penalised for their loyalty.

“Companies routinely use tactics that take advantage of human behaviour – and regulators are letting them get away with it. That’s why regulators need to take action by setting targets to reduce the number of loyal customers who pay over the odds, and investigating solutions for vulnerable customers.”

Guy said the upcoming Consumer Green Paper, announced by Philip Hammond in the March 2017 Budget, was an opportunity for government to show they are on the side of the consumer by protecting them from unfair practices that exploit their loyalty.

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