Loyalty penalty super-complaint – An update

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The Competition and Markets Authority and the Financial Conduct Authority have responded to the Citizens Advice super-complaint about the so-called ‘loyalty penalty’ affecting long-term existing customers in the mobile, broadband, cash savings, home insurance and mortgages markets. Walker Morris’ Retail Finance specialists explain.


Walker Morris has reported previously that, on 28 September 2018, Citizens Advice (CA) lodged a ‘super-complaint’ with the Competition and Markets Authority (CMA), calling for action to stop long-term customers being penalised for their loyalty.

The complaint was prompted by the treatment of mortgage customers who, at the end of the fixed term under the terms of their existing deals, find themselves either rushing into unfavourable new deals or ‘trapped’ into paying mortgage interest on lenders’ standard variable rates [1].  However it actually covers five key markets: mobile, broadband, cash savings, home insurance and mortgages.

The complaint called upon the CMA and the Financial Conduct Authority (FCA) to take action which, it was suggested (in the financial services context), might involve requiring lenders to proactively ensure that existing customers – in particular vulnerable customers and those who might lack digital or other skills which would enable them to easily shop around – are on the best deals available to them.  CA also suggested that limiting the difference between the best and worst deals offered within the mortgage market might represent a solution.

The CMA and the FCA have now published their responses [2].

Regulators’ responses

The CMA has stated that it agrees that vulnerable long-term customers are being “ripped off” and it makes various recommendations, including:

  • clamping down on harmful practices that stop people getting better deals;
  • setting out clearly principles that businesses across all markets should follow, such as people being able to leave a contract as easily as they enter it;
  • holding businesses publicly to account for charging existing customers much more;
  • potentially using targeted price caps to protect those hit by the loyalty penalty; and
  • in the mortgage market context, the FCA finding out more about customers who could switch but do not, and looking at what can be done to help or protect them.

The FCA has stated that this issue is a priority; that it agrees with the CMA that harmful practices should be tackled robustly; and that it will consider how to act on the CMA’s recommendations.

What’s next?

So far, the CMA has stopped short of recommending the launch of a full market study into the loyalty penalty across the five subject markets. Those markets will, however, be subject to a high degree of scrutiny over the coming twelve months.  Businesses should therefore review their practices – particularly when it comes to dealing with vulnerable customers – to ensure that they are not falling foul of competition or consumer protection law.

Walker Morris will continue to monitor and report on key developments.

If you would like any assistance with your compliance review arising from this super-complaint, please get in touch with any of Walker Morris’ Retail Finance specialists, and we will be very happy to help.


[1] which are generally much higher than fixed term rates, and can mean a significant increase in monthly repayments
[2] CMA response: Tackling the loyalty penalty; FCA statement, 19 December 2018