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Citizens Advice makes super-complaint over rip-off phone charges

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Consumer charity Citizens Advice has lodged a so-called super-complaint with the Competition and Markets Authority (CMA) accusing the broadband, mobile, home insurance, mortgage and savings industries of overcharging loyal customers to the tune of £4.1bn every year.

This is the fourth time Citizens Advice has invoked its power to lodge a super-complaint; in 2005, its complaint about payment protection insurance (PPI) had serious repercussions for the financial services sector. To date, over £30bn has been returned to customers in refunds and compensation.

Earlier in September 2018, the organisation released a report claiming Britain’s mobile network operators (MNOs) were frequently charging customers on monthly contracts that include the cost of their smartphones for devices that had been fully paid off.

In the wake of this, it responded positively to the announcement by telecoms regulator Ofcom that it was to conduct a consultation on how to make mobile service pricing more transparent.

However, the problem does not solely exist in the communications sector. Citizens Advice said the practice was widespread across multiple industries, and that 80% of Britons were inadvertently paying a significantly higher price in at least one of its target markets for remaining with their existing supplier following their initial contract period, according to weighted ComRes polling conducted in July 2018.

It believes the loyalty penalty is an average of £877 per annum, which works out at about 3% of the average home’s total annual spending.

It added that this penalty disproportionately affects vulnerable people who may be less motivated or unable to contact their provider to change or upgrade their contracts, or may not even know the possibility exists.

Citizens Advice cited an example of a woman who contacted it on behalf of her elderly parents who had stayed with the same home insurance company for six years, had not noticed that their premiums were rising and were paying over £1,000 more than they could have been if they had switched provider.

“It beggars belief that companies in regulated markets can get away with routinely punishing their customers simply for being loyal,” said Citizens Advice chief executive Gillian Guy. “As a result of this super-complaint, the CMA should come up with concrete measures to end this systematic scam.”

“Regulators and Government have recognised the loyalty penalty as a problem for a long time – yet the lack of any meaningful progress makes this super-complaint inevitable,” she said.

“The Government’s price cap in the energy market will protect some loyal customers. However, there’s still a long way to go in other sectors. The loyalty penalty is clearly unfair – 89% of people think it is wrong. The CMA needs to act now to stop people being exploited.”

A Vodafone spokesperson said: “We already contact all of our customers when they are approaching the end of their minimum term to let them know their options. These include upgrading their device or moving to a SIM-only contract so they are not paying anything for a handset.

“From next month, we will also be giving extra data to those customers who don’t opt for either of these alternatives but instead choose to stay on their contract after the end of their minimum term.”

Transparency for consumers

Three said it too was always looking for ways to make things more transparent for consumers: “We have campaigned on switching reform for over 10 years, introduced zero-rated data and abolished roaming charges.

“We have engaged consistently with government, regulators and Citizens Advice over the last 18 months, to find new solutions for handset financing and highlighted regulatory barriers to innovation in this area. We are investigating how we can extend the type of tariffs we offer that will further improve choice for our customers.

“We make the length of any contract very clear to new customers and make this information available through our customer service channels at all times. Should they wish to make any changes, customers are encouraged to contact us and discuss the range of options available to them at any point,” said Three’s spokesperson.

Now the complaint has been made, the CMA will be required to make a public response within 90 days to say whether or not they believe it is an issue – and if not, why not, and how they plan to deal with it.

Citizens Advice acknowledged that because its complaint covered several diverse sectors, there was no apparent one-size-fits-all solution, and urged the CMA to commit to working closely with the regulators and government to tailor its response to each market.

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