Citizens Advice, an organization that helps people in the UK with a whole range of issues, has called on Ofcom to tackle so-called loyalty penalties. After your contract comes to an end, broadband and mobile fees go up substantially, and Citizens Advice wants this to stop. For companies, it allows them to collect up more money, which can be reinvested in infrastructure.
Recently, the Vodafone CEO said fewer mobile operators were needed to keep up with infrastructure costs. By forcing firms to stop charging higher prices for out-of-contract customers, it could potentially hurt the state of infrastructure in the country. Ofcom has already introduced pro-customer changes in recent years by forcing companies to alert customers when their contract is about to end. This change has led to the number of out-of-contract customers falling by more than one million.
Citizens Advice cited a woman called Tracey who relies on disability benefits. In 2006, she took out a £30 per month package which gave her TV, landline, broadband, and international calls. This year, she finally decided to look through her bills to save money and found it had risen to £80 per month. Explaining her situation, she said:
“Everything is going up; gas, electric, food, and I have a mortgage to pay. I shop late in the evenings to get yellow-sticker discounted food, I turned off my gas as I can"t afford to repair the boiler or use the heating, and I don"t go anywhere other than my hospital appointments. New customers pay £50 less than me for the same deal. I have paid nearly £3,000 more for being a loyal customer. How on earth can they justify me paying so much more – especially as I was with them for 16 years?”
People on lower incomes are being hit hard by the loyalty penalty, according to Citizens Advice. Some are worried about switching their provider in case a credit check causes some sort of issue. If Ofcom acts on Citizens Advice’s request, it could see customers automatically moved onto better deals without any action on their part. It’s not likely to be popular with providers, though, who say they’re struggling with keeping networks up to the latest standards.