The Competition and Markets Authority (CMA) has urged the FCA to set a timetable for introducing remedies to prevent loyal mortgage customers being overcharged
The competition regulator has urged the Financial Conduct Authority (FCA) to set a timetable for tackling and introducing remedies to prevent loyal mortgage customers being overcharged.
The Competition and Markets Authority (CMA) welcomed the FCA’s market study to help mortgage prisoners move onto better deals where feasible. But it highlighted the critical issue of why some customers do not switch lender and said this “cuts to the core of the loyalty penalty in this market”.
The CMA is investigating five sectors where companies are accused of penalising longstanding customers by charging them higher prices than new customers or those who renegotiate their deal.
They are: mobile phone contracts, broadband, household insurance, cash savings and mortgages.
In its latest update report, the CMA pushed the FCA to put a concrete schedule in place for the mortgage market, as it had done for savings.
The CMA said that they also recommended the FCA look at what measures may be needed to help or protect the 10 per cent of long-standing customers who could switch and make significant savings but do not.
The FCA has been undertaking further research to understand more about these customers and the reasons why they are not switching.
This research has now been completed and the FCA is currently considering the case for potential remedies. This is an issue that cuts to the core of the loyalty penalty in this market. Therefore, they encourage the FCA to set out a timetable, similar to the one for cash savings, for this work and for implementing remedies that help or protect these consumers, if needed, it added.
For household insurance, the CMA welcomed the interim findings of the FCA’s general insurance market study.
This study found that general insurance markets are not working well for consumers and identified a range of practices and complex pricing strategies employed by firms that make it difficult for consumers to get better deals.
The report discusses a range of potential remedies to address these practices, which include: banning or restricting practices such as raising prices for consumers who renew year-on-year, or requiring firms to automatically move consumers to cheaper equivalent deals.
It raised the prospect of compelling insurers to publish information about price differentials between customers and previews a future strategy on Open Finance.
The CMA said that they welcome the candidate list of remedies which represent a good range of potential responses to the problems identified.
It looks forward to seeing a final set of remedies that are effective at addressing the scale of consumer detriment in this sector, the CMA said.
The CMA has continued calling on government to bring forward its promised Consumer White Paper.
This, the CMA said, would bring extra powers to help it act “even more decisively on behalf of consumers and fine firms that break the law”.
CMA chief executive Andrea Coscelli said that just over 12 months ago they reported that people were being over-charged by around £4bn a year in essential markets.
Coscelli said, it is important that practices that aid this are stamped out and they are pleased to see progress has been made in helping to stop people being penalised for their loyalty. But more still needs to be done to make sure that loyal and in some cases vulnerable customers are not let down or ripped off. They urged the regulators of the industries under scrutiny to keep up the pace, and will continue to monitor their progress, she added.