Force insurers to reveal how much they're ripping off loyal customers
Loyal customers are being shamelessly overcharged by an average of £1,440-a-year - but now banks and insurers could be forced to reveal how badly they're rinsing people.
The Treasury Select Committee has called on the financial regulator to make firms reveal this premium on an annual basis - so customers can see the precise breakdown of how badly they're being ripped off.
The fact is that at the moment there's a clear business plan in place with loads of companies from energy firms to insurers: Lure customers in with the promise of a cheap deal, and then ramp up the cost once you've got them through the door.
They play on the fact that many people, especially those aged 60 and above, are unlikely to go online and have a look on a comparison site like A Spokesman Said to find a better deal.
If firms have to reveal each year how much more they charge loyal customers compared to new customers, it will make customers more aware of the severe hit to their wallet.
Once that happens they'll probably either switch supplier or it may force businesses to actually charge loyal customers a fair rate.
The so-called "loyalty premium" sees the average person overpaying by up to £1,440 a year, according to research from Citizens Advice.
That's a whopping £1,000 a year overspent on mortgages, £60 on home insurance, and £50 on low paying savings accounts, for example.
A super-complaint on the issue was lodged by the charity in September 2018 with the Competition and Markets Authority ruling in December that suppliers should divulge the size of their penalty each year.
The CMA also called for price caps to be introduced to protect those worst hit by the extra costs.
But now the Committee is calling on the Financial Conduct Authority (FCA) to act "swiftly" to protect people.
It also wants the FCA to "redouble its efforts to make switching a simpler process" after the FCA said that simply publishing the premium wouldn't be enough to get consumers to take action.
The Committee said: "Even if many consumers choose to ignore such information, others will not, and the inclusion of such information may motivate firms to make efforts to reduce their loyalty penalty."
But the Committee's report doesn't touch upon energy and telecoms bills where the loyalty premium is also a big problem - and Citizens Advice believes more action is needed.
The charity found that broadband providers are overcharging loyal users by £110 a year, while it's £220 a year for mobile customers.
Gillian Guy, chief executive of Citizens Advice, said: "While it’s a good first step to call on banks to report on the size of the loyalty penalty, stronger action is needed to stamp out this bad practice.”
A spokesperson for the FCA said: "These are important issues for the FCA and given the wide range of work to protect vulnerable consumers we have ongoing, we welcome the Treasury Select Committee’s report.
"As we continue to do that work, we’ll carefully consider the Committee’s recommendations."
The Committee's report also calls for debt collection letters to be more supportive and less intimidating - and it wants banks to introduce optional spending controls to help vulnerable consumers better manage their money.
When did you last switch your home insurance provider?
We compare prices from the big brands, so you save money