Watchdog calls for action against unfair loyalty penalties

Watchdog calls for action against unfair loyalty penalties

Following complaints by Citizen’s Advice, the UK’s Competition and Markets Authority (CMA) has issued an urgent call for action against mobile providers who, they say, penalise loyal customers.

In its investigation the watchdog said that that mobile providers were not playing fair and demanded that they release customers from costly contracts once the have paid for their device.

In all it found what it called a range of dodgy practices that penalise customers, such as year-on-year stealth price rises, costly exit fees, difficult processes for cancelling contracts or switching, the practice of requiring customers to auto-renew and not giving proper warning when contracts will be rolled-over.

The CMA put forward a number of recommendations to the government and regulators that, they said, would tackle the so-called loyalty penalty. These included establishing a set of clear principles for mobile providers to follow and also included publishing data on the size of the loyalty penalty for suppliers each year.

Overall, we have found that the loyalty penalty is significant and impacts many people, including those who can least afford it. Customers rightly feel ripped off, let down and frustrated. They should not have to be constantly ‘on guard’ or spend hours negotiating to get a good deal. This erodes people’s trust in markets and the system as a whole.

- Competition and Markets Authority: Executive Summary, Tackling the Loyalty Penalty

The CMA also backed the requirement that customers on bundled handset and airtime contracts be moved to a fairer tariff when their minimum contract period ends.

Recently, the UK’s communications watchdog Ofcom took steps addressing this very issue. It published plans that will require mobile providers to tell customers when their contracts were up and to alert customers to better deals.

Alongside its investigation into the loyalty penalty, the CMA has also launched a review of the antivirus software market. It is expected to look at whether automatic renewals are set as default, whether the customer is notified, and if so, whether renewed subscriptions costs the same as the original.

The CMA has also called on the government to press ahead with its smart data review. This has seen demands that mobile providers improve data portability, so customers can switch more easily.

According to the Information Commissioner’s Office (ICO) data portability allows individuals to obtain and reuse their personal data for their own purposes across different services. It allows them to move, copy or transfer personal data easily from one IT environment to another in a safe and secure way, without affecting its usability.

The CMA has said it wants to see urgent action taken on its recommendations, with the ominous warning that ‘if sufficient progress isn’t made, it may take further action.’


A veteran freelance journalist writing extensively on internet news and cybersecurity.
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