10/04/2019 Did you know that you pay a hefty financial price for staying loyal to business? From insurance to broadband, chances are you’re being hit with a loyalty tax for staying with the same provider of the service.
For decades, a huge range of industries have made billions through a sneaky ‘open’ secret – the ‘loyalty charge’. This is where people who stick with the same service provider out of loyalty or convenience face increases in monthly or annual payments every time their agreement comes up for renewal.
In one of the most shocking examples Resolver has ever seen (and we’ve seen TONS of them), we spoke to a man whose elderly mother was paying just shy of £2,000 for home insurance. He found out and spoke to some of her neighbours, finding one with the same company who was paying just £300 for the same policy.
For years, businesses have acknowledged that this behaviour is unfair and promised to change their ways – but never have. However, in the last year, thanks to publicity in the media we reached a tipping point where the practice became so well known that people began to look at their own policies and get angry.
The Competitions and Markets Authority (CMA) investigated five industries (savings, mortgages, insurance, mobile and broadband service providers) and found that an astonishing £4 billion extra a year was being paid out by loyal customers, with more vulnerable people or those struggling financially likely to be stuck paying more.
Though this practice is finally being clamped down on, don’t expect changes overnight. Here are a few tips to help you tackle overcharging by businesses you’ve stayed loyal to.
- When you sign a contract, put a note in to your calendar for when the contract runs out. Then go back a month and put a reminder in so you’re prepared in advance.
- Shop around ahead of the contract renewal. Keep an eye on the news for bad/good deals and businesses that have been warned or fined.
- Never assume your loyalty means you’ll be treated better. You won’t and you’ll be overcharged.
- Be wary of contracts that run over a year if you’re likely to change your lifestyle – you may have to pay fees to get out of them.
If you think you’ve been overcharged, here’s what you do:
- Start by turning detective. Find out when you signed up to the contract and when the original one was supposed to expire. If you’re paying for a phone or other goods as part of the contract, look for the date the item is paid off (it will be on your bill or online account).
- Go on to the website for the business and see what you would be charged if you were a new customer for the same package. It’s worthwhile checking on comparison sites too, in case there are even cheaper deals around.
- Contact the business and ask them to explain why you’re paying a higher price than a new customer and ask them to reduce your bill or match the price. Be prepared to vote with your feet.
- The rules don’t say that the business has to refund you for what it’s over charged you, but you can make a complaint and ask for the money back – and there are ombudsmen you can go to for free for all the industries that have been investigated so far.
Most importantly, spread the word. Chances are you have a relative or friend who isn’t aware of the savings they could be making by shopping around. Have a chat and help them find a better deal or make a complaint. Starting 2019 with more cash in the bank is a good way to go on!