FCA Reaction to Loyalty Penalty Super Complaint

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, commented:

“Before the CMA published its supercomplaint response last year, we had already begun work in the mortgages, cash savings and general insurance markets. Ensuring that markets work well for longstanding and vulnerable consumers continues to be a priority for us and the loyalty penalty is a serious issue. We will continue to work closely with the CMA and other regulators on the recommendations relevant to us.”

The Competition and Markets Authority (CMA) published its response to the Citizens Advice supercomplaint on the loyalty penalty in December 2018, making several cross-cutting and market-specific recommendations in the mortgages, cash savings and home insurance markets. Today (19 June 2019) it will publish an update on progress against its recommendations.

Ensuring that markets work well and provide fair outcomes for longstanding and vulnerable consumers has been and continues to remain a priority for us. Before the CMA published its supercomplaint response last year, we had already begun work in the mortgages, cash savings, and the home and motor insurance markets.

The current position on our work in these markets is:

• We have now completed our mortgages market study, and we are taking forward remedies, including detailed research to understand the characteristics of consumers who do not switch, to inform any further necessary interventions.
• In May, we announced the next steps and timing on our work on price discrimination in the cash savings market. We will publish a feedback statement or consultation paper by the end of this year.
• Our market study into general insurance pricing practices in home and motor insurance is ongoing, and we’ll publish the interim findings of this work during the summer.

We are also working closely with the CMA, UK Regulators Network (UKRN) and other regulators on the cross-cutting recommendations. We are considering our regulatory approach to cross-cutting issues, including:

• our work on firms’ Duty of Care
• the identification and fair treatment of vulnerable consumers
• fair pricing in financial services, and
• the future role of Open Finance

We are continuing to work with the UKRN and other regulators on performance scorecards and the potential publication of price differential metrics as part of this. We have identified potentially harmful business practices that were also highlighted in the CMA’s work, and we are tackling these through our supervision of firms.

Our operational objectives are to secure an appropriate degree of protection for consumers, protect and enhance the integrity of the UK financial system, and promote effective competition in the interest of consumers. The FCA Mission sets out how we approach meeting our objectives, how we prioritise, and our focus on intervening where we can add the most public value addressing harm we see. Several of our key cross-cutting projects are therefore designed to address the harms which are also felt by groups of consumers impacted by issues in the CMA work. For example:

• Identifying and diagnosing harm, including our review of competition in the non-workplace pensions market, and our ongoing work in general insurance and cash savings.
• Interventions to prevent harm, including our work to reform overdrafts and other forms of high-cost credit, and taking forward the remedies from the mortgages retirement income and investment platforms market studies.
• Evaluating the effectiveness of our interventions, for example our current work on the rules we introduced in 2017 to increase transparency and engagement at renewal in general insurance renewal, and the subsequent market study on pricing practices.