Financial services companies should be forced to upgrade existing customers to better deals automatically, rather than force them to be lumbered with poorly performing products while new customers get offered the best deals.
The Financial Services Consumer Panel – chaired by Wanda Goldwag – is urging the Financial Conduct Authority to introduce an automatic-upgrade rule after its research found many consumers are trapped in financial services products to their detriment.
The report follows a “super-complaint” made by Citizens Advice which raised concerns about long-term customers paying more for goods and services.
The FS Consumer Panel’s “Case for Automatic Upgrades” study looked at the performance of eight products – current accounts, cash ISAs, credit cards, mortgages, investment products, pensions, home insurance and income protection – and found that some customers could be losing up to 10% of their annual income due to so-called “loyalty penalties”.
The upgrades suggested by the panel would mean people on poor deals, who are paying high costs and charges or receiving low returns, would be automatically moved on to better products offered by the same provider.
Goldwag said: “The research demonstrates the detriment for consumers of remaining in poorly performing products and the need to ensure that all consumers are treated fairly.
“Loyal customers are often those who are too busy to search for and switch to better products, those who do not switch due to behavioural biases, those trapped with their existing provider or those who are not aware that better alternatives exist.
“Consumers should not be penalised for this loyalty. An automatic-upgrade rule would level the playing field.”
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