Government plans new powers to stop firms exploiting loyal consumers
The competition watchdog is set to be given new powers to fine companies exploiting consumer loyalty in a crackdown on “subscription traps” and unfair cancellation charges.
The government has proposed giving the Competition and Markets Authority (CMA) legal powers to penalise firms without going through the courts.
Read more: UK watchdog calls for new powers to tackle £4bn ‘loyalty penalty’
It comes after consumer body Citizens Advice lodged a “super complaint” regarding loyalty penalties in the mobile phone, broadband, mortgages and insurance markets.
The CMA in turn proposed the crackdown and the government has now launched a consultation on the new powers.
The government said the powers would act as a “powerful deterrent” to companies harming consumers with misleading claims, unfair terms and conditions and hard-to-exit contracts.
It could include a range of products, including mobile phone contracts, broadband, mortgages and insurance.
Business secretary Greg Clark said: “I strongly believe that consumer loyalty should not be exploited and nor should consumers have to work so hard to get a fair deal.”
Regulators, such as Ofcom and the Financial Conduct Authority could also be given new powers to tackle the issue.
Read more: How to avoid paying the loyalty penalty on your mortgage
“For far too long, many big companies have been getting away with harmful trading practices which lead to poor services and confusion among customers who have parted with their hard-earned cash,” the Prime Minister Theresa May said.
“The system as it stands not only lets consumers down but it also lets down the vast majority of businesses who play by the rules,” she added.
Head of regulation at uSwitch.com Richard Neudegg said: “Providing the regulators with greater fining powers would strengthen consumer law across all industries, and fire a warning shot across the bows of companies who try to bamboozle their customers.
“As ever, the devil will be in the detail when it comes to how this will actually benefit customers.”