Customers who stay loyal to their providers are losing out to the tune of over £4bn a year, according to Citizens Advice.

The national charity has lodged a super-complaint with the Competition and Markets Authority (CMA), calling for the regulator to outline how the problem can be fixed.

It said that the practice of overcharging loyal customers is widespread and has repeatedly warned that loyal consumers are being ripped off across five essential markets – mobile, broadband, home insurance, mortgages and savings.

Stay longer, pay more

Citizens Advice found that eight in 10 people are paying a significantly higher price, in at least one of the markets, for remaining with their existing supplier. This loyalty penalty is, on average, £877 per year.

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

The charity also found the loyalty penalty is disproportionately paid by vulnerable consumers, such as older people and people with mental health issues. These groups are particularly likely to struggle with switching.

By submitting this complaint the organisation is asking the CMA to investigate all markets where the loyalty penalty exists. Because the sectors are so diverse there is no one-size-fits-all solution. The CMA will need to work closely with other regulators and the Government to ensure the right action is taken in each market.

Gillian Guy, added: “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. The loyalty penalty is clearly unfair – 89% of people think it is wrong. The CMA needs to act now to stop people being exploited.”

Industry response

Trade body UK Finance responded to news of the super-complaint. Eric Leenders, managing director of personal finance at the association, said: “UK Finance and its members will carefully consider the issues raised by Citizens Advice and respond in due course.

“The industry has already implemented a number of measures to further improve competition in the mortgages and savings market, including communicating more clearly with savers about the rates they receive and helping longstanding mortgage borrowers switch to a better deal.

“We would always encourage customers to shop around and find a deal that best suits their needs and will continue working with the regulators to make this as easy as possible, including through standard terms and price comparison tools.”