The Competition and Markets Authority (the CMA) posed four questions surrounding “loyalty penalties” in mobile phone contracts, broadband, home insurance, mortgages and savings, following a super-complaint by Citizens Advice (the CA) on 28 September 2018.

We restrict our comments to the two product areas in the CA’s list that are relevant to our members; namely, savings and mortgages.

An overall observation is that, in a competitive market, prices and charges will inevitably vary from product-to-product and firm-to-firm. There is a limit to how far regulators or government should intervene in pricing practices within industries that are competitive, wellregulated and have a strong ombudsman service – and where firms have provided customers with all relevant information and there are no unfair barriers to changing products.

There is also a significant issue concerning personal choice and responsibility and whether it is appropriate for government or regulators, in effect, to regulate consumers through the medium of firms. Price is not always the key determining factor for a consumer, with service, trust and ethos among the various other relevant factors. We need to exercise great caution in moving too far down a command and control path as we simply do not have enough insight into a customer’s affairs to definitively understand why people may make certain choices.

However, we fully acknowledge that a different set of considerations applies where firms have not complied with regulatory requirements or where the customers in question are vulnerable. In the former case, it is very important that the relevant regulator supervises and enforces effectively. In the latter case, it is crucial that firms have fair and flexible policies and practices for assisting and supporting vulnerable customers.

Though not always perfect, customer-owned mutuals, such as building societies and credit unions, do tend to demonstrate a track record of better customer treatment, as evidenced by better interest rates, higher service scores, and considerably fewer cases of misconduct. We ascribe this to the ownership structure, and the organisational culture that flows from it: customers are much more central to the organisation’s purpose, and the needs of shareholders and customers do not conflict as they might do at quoted companies. Regulation that effectively pushes towards homogenisation risks reducing the effective competition that different approaches bring to bear.

Read the full response here.