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Systematic scam continues: loyalty penalty deadline passes without enough action from regulators

19 June 2019

Citizens Advice is concerned that loyal customers have been penalised by nearly £3 billion since it submitted its super-complaint.

The charity lodged a super-complaint in September calling for the Competition and Markets Authority (CMA) to outline how the loyalty penalty could be fixed in five essential markets (mobile, broadband, home insurance, mortgages and savings).

The CMA was clear in its December response that it wanted to see urgent action and that the relevant regulators - Ofcom and the Financial Conduct Authority (FCA) – would update on their progress within six months.

That deadline is today. The charity is concerned that the delay in cracking down on the loyalty penalty means customers are still losing out.

Ofcom has announced that it will make companies send a reminder to their customers when their contract is about to end. But given the scale of the loyalty penalty, Citizens Advice don’t think this will be nearly enough to solve the problem.

The charity wants both Ofcom and the FCA to demonstrate they’re serious about tackling the loyalty penalty by considering measures such as targeted pricing interventions and making sure vulnerable customers aren’t being penalised.

Citizens Advice is calling on the regulators to take the following actions in each market urgently:

  • Mobile - Ofcom should move more quickly to end the mobile loyalty penalty by automatically putting customers onto a fairer tariff. If they don’t, the government should legislate.

  • Mortgages - The FCA should require firms to put vulnerable and low-income customers on to better value mortgage deals.

  • Home Insurance - The FCA needs to consider limiting or banning ‘price-walking’ and require companies to put vulnerable or low-income customers on the best value deal for their circumstances.

  • Savings - The FCA needs to confirm their proposal to introduce a basic savings rate, which they estimate will save customers a net £300 million a year.

  • Broadband - Some loyal customers on standard deals are paying more than new customers for superfast broadband. Ofcom must ensure that firms are making sure their customers are on the best deals for them and ensure vulnerable customers are on the best deals for their circumstances.

Bob, 81, from London, was losing hundreds of pounds a year due to the loyalty penalty. He explained:

“I was with the same home insurance company for around 30 years. When I sold my home to downsize I decided to stay with them as it's easier to stick with what you know. They did reduce the premium but year-after-year it began to creep up again.

“Later on I wanted to add an item to our insurance but I was told they were unable to give us cover for that. I looked at other insurance companies and to my intense horror found that their quotes were a fraction of what I had been paying.

“Previously I was paying around £783 per year and now I pay £152 which is a huge saving.

“Comparing our current annual premium as a percentage of what my old insurer charged I have calculated that I overpaid in excess of £7,000 for being a loyal customer.

“It is terrible to think that by being loyal you are actually being overcharged for the same service as someone who continually switches or is a new customer. Clearly loyalty no longer pays.”

Gillian Guy, Chief Executive of Citizens Advice, said:

“We’re disappointed that a lack of action from regulators means customers continue to be penalised simply for being loyal to their provider.  

“In its response to our super-complaint the CMA set out ambitious recommendations for tackling the loyalty penalty. But it seems little progress has been made by the regulators within the first six months. This is not good enough.

“The FCA and Ofcom need to urgently set out their plans for tackling this systematic scam.”



Citizens Advice submitted a super-complaint on the loyalty penalty - in the mobile, broadband, home insurance, mortgages and savings markets - 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 in 2018 by Citizens Advice found that across five 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).

  • Eight 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 across the five markets is, on average, £877 per year

This is the fourth super-complaint Citizens Advice has made since being given the power in 2002. Its super-complaint on payment protection insurance (PPI) in 2005 helped to generate a huge win for consumers, with at least £34.9 billion returned to customers in refunds and compensation so far.

Since Citizens Advice submitted the loyalty penalty super-complaint:

The Government announced yesterday it will give the CMA new powers to fine firms that are exploiting loyal consumers, as well as its intention to abolish the mobile phone loyalty penalty through legislation if necessary. Full announcement here

Ofcom has published a statement on requiring providers to send end-of-contract and annual out-of-contract notifications to all mobile and broadband customers. Citizens Advice welcomes this, but it doesn’t go far enough. Full response here

Through Ofcom’s Fairness Commitments, major broadband and mobile companies committed to offering customers packages that fit their needs and have a fair approach to pricing. It is unclear whether this will mean they reduce prices for loyal customers.

The FCA published its final market study findings in March 2019 but did not set out concrete proposals for tackling the loyalty penalty.

Notes to editors

    1. The loyalty penalty super-complaint can be found here.

    2. The CMA’s press response to the super-complaint can be found here.

    3. The Loyalty Penalty Cross Sector Report can be found here.

    4. Earlier this year Citizens Advice found home insurance companies make 100% of their profits from the loyalty penalty.

    5. The PPI figure is sourced from the FCA.

    6. The CMA has announced enforcement action in other markets.

    7. 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.
    8. To get advice online or find your local Citizens Advice, visit
    9. For consumer advice, call the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 to talk in Welsh.
    10. 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.
    11. Citizens Advice staff are supported by over 23,000 trained volunteers, working at over 2,500 locations in England and Wales.