UK FCA says that firms should not treat existing customers less favourably than new

Brendan Burgess

Brendan Burgess

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the FCA's Business Plan for 2018/19 on PDF page 28

https://www.fca.org.uk/publication/business-plans/business-plan-2018-19.pdf



Cross-sector priorities
Treatment of existing customers


Our aim is to ensure that existing customers enjoy the benefits of increased competition and
innovation. Firms should not give longstanding customers less attention than new customers or treat them in a way which results in poorer outcomes. All customers should be well informed about the financial products they buy or are invested in, including performance and charges.

If competition is working well in a market, it should not overly disadvantage existing customers over new customers. While many firms have made progress in putting customers more firmly at the centre of their business models, they need to further improve both competition and their standards of treatment for existing customers.
 
This is a very interesting statement from the FCA.

It seems to have been sparked by the dual pricing of insurance products. New customers get a competitive price, but at renewal, the price for existing customers is much higher.

But presumably, it applies to mortgage rates as well.

It's even more important because of the difficulty and cost of switching mortgages.

If my insurance company quotes me £850 for renewal of my house insurance and I call them as a new customer and get quoted £200, I can either avail of that rate or switch to another insurer. It takes time to switch lender and not all people can do so.

And everyone understands absolute numbers. £850 is higher than £200. Most people can't compare mortgages. They don't understand percentages. They frequently think that a mortgage with lower repayments is cheaper, even if the interest rate is higher and the term is longer.

Should lenders be prevented from exploiting the inertia and lack of knowledge of customers?

Brendan
 
It's very common in the UK mortgage market, and caught a lot of people out when rates rose as they were on introductory rates and then couldn't switch lender. They've also got the extra cost of an arrangement fee.

There was a remediation previously (around 2001/2002) when then banks introduced multiple 'standard' variable rates, so the banks there are very careful with how they do it now. (Effectively they did what KBC are doing here, and the FSO decided it was unfair).

The FSA seems to be more concerned about different rates being available through brokers rather than directly from banks. A large portion of the UK market is through brokers.
 
Brendan Burgess said:
Should lenders be prevented from exploiting the inertia and lack of knowledge of customers?
Click to expand...
Back to Ireland I think as a first step, the SVR policy statements from each bank should be reviewed in light of their actual pricing, to prove it's not just a box ticking exercise producing them.
 
Hi Brendan,

Some of the banks introduced a 2nd, lower, standard variable / base rate. New customers automatically got the new rate, but existing were left on the old one. It was challenged on the basis that contracts referred to "our base rate", and ambiguity was created by having more than 1.

Can't find ombudsman finding from the time, but here's an example article from BBC:
http://news.bbc.co.uk/2/hi/programmes/working_lunch/1525124.stm

Red.
 
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