Labour bill would save people money by tackling the loyalty penalty and poor customer service

Labour Trade Unionists
15 December 2020
  • Proposed law would outlaw practise of existing customers being charged higher rates for subscription services like insurance, utilities and telecommunications.
  • Obliges companies like Eir to handle customer complaints according to a regulated standard.
  • Would ensure lower prices and better customer service.

A new bill published by Labour Party TDs Ged Nash, Duncan Smith and Aodhán Ó Ríordáin would greatly improve consumer protections by outlawing the loyalty penalty for existing subscribers of services like insurance, utilities and telecommunications, while also imposing an obligation on service providers like Eir to establish a system to handle customer complaints to a regulated standard.

Deputy Nash, Labour Finance spokesperson said:

“As shown by the Central Bank yesterday differential ‘dual pricing’ in the insurance industry is widespread and imposes a loyalty penalty on customers. This means those who are less likely to switch end up paying way more for their insurance. We want to address this dual pricing issue through a simple change to the law that would ensure existing customers when renewing their policy or subscription cannot be charged a higher fee than a new customer. This would be deemed an unfair commercial practice.

“This will tackle the practice that exists in many sectors, not just insurance, of charging higher prices to existing customers who are less likely to switch. Our bill would outlaw loyalty penalties for services provided to consumers on subscription or rollover. In most consumer relationships, loyalty is rewarded not penalised. The ‘loyalty penalty’ is particularly galling, as it punishes those ordinary customers, many of whom are older people and other vulnerable groups who may not keep up to date with every changing market product and various complex offers. That means the longer a customer remains with their insurer, the more they can expect to pay.

Deputy Smith, Labour Communications spokesperson said:

“The loyalty penalty is also common in other sectors of the economy such as utilities and telecommunications. Every year people renew their electricity, gas or phone contract. Under our bill these would be defined as subscription services, and the company would not be allowed to charge existing customers higher rates.

“We also want to tackle the problems of poor customer service in the telecommunications industry. Energy companies under the terms of their license must set up a complaints handling scheme that satisfies minimum criteria. However mobile and broadband providers are not licensed in the same way. That’s why we would impose a general obligation on service providers to set up a system for handling customer complaints to a certain regulated standard or abide by their own procedures and commitments. The debacle we have seen with Eir recently cannot be allowed to repeat itself.

Deputy Ó Ríordáin, Labour Enterprise spokesperson said:

“Consumer protection really isn’t strong enough in Ireland. The market allows the exploitation of customers who don’t shop around regularly which puts the onus on the individual to change. We want to restore trust and ensure people don’t feel ripped off. Companies shouldn’t be allowed discriminate against existing customers by offering cheaper rates that are only available to new customers. Nor should poor customer service and handling of complaints be allowed.

“The market cannot be trusted alone to deliver good customer service and fair pricing. By legislating we can however tip the balance in favour of the ordinary person.”


Notes to Editor:


Purpose of Bill

This Bill has two principal purposes. First, it is the practice of many providers of subscription services to advertise attractive rates for new subscribers which are not available to their existing customer base. In other words, suppliers charge higher prices to existing customers who they believe are unlikely to switch to another provider in order to get a better deal. Many such services are paid for through automatically renewed or rolled over contracts. The result is that, in many cases, people who stay with their supplier end up paying significantly more – the so-called ‘loyalty penalty’.

In the UK, Citizens Advice submitted a super complaint on the loyalty penalty phenomenon to the Competition and Markets Authority in September 2018, calling for it to recognise the problem and consider how it could be fixed. The CMA investigated these concerns and, in its December 2018 response, it agreed with the complaint and said that it had found damaging practices by service providers which exploited unsuspecting customers. The CMA said that –

“the loyalty penalty is significant and impacts many people, including those who can least afford it. Customers rightly feel ripped off, let down and frustrated. They should not have to be constantly ‘on guard’ or spend hours negotiating to get a good deal. This erodes people’s trust in markets and the system as a whole. Not enough has been done in the past by the CMA and regulators; there needs to be a step-change to tackle these problems more effectively.”

The first purpose of this Bill is to outlaw loyalty penalties for services provided to consumers on subscription.

Second, consumer protection law does not impose a general obligation on service providers to establish a system for handling customer complaints – or to abide by their own procedures and commitments if they do have such a system in place.

There is such a requirement in force in some but not all regulated sectors. In the case of gas and electricity providers, for example, these utilities are licenced and it is a term of the licence imposed by the Commission for Regulation of Utilities that the service providers establish a complaints handling scheme that satisfies minimum criteria. However, mobile and broadband providers are not licenced by ComReg in the same way as energy companies are licensed by the CRU, and so there is no requirement for undertakings in that sector to have a complaints scheme in place.

The second purpose of this Bill is to impose, as a matter of general consumer protection law, a requirement on all undertakings that provide services to consumers on subscription a requirement to establish a complaints handling scheme that meets the requirements set out in this Bill.

Provisions of Bill

Section 1 amends section 41 of the Consumer Protection Act 2007 by inserting a new subsection (4). Under the new subsection, where a trader supplies a service to subscribers, it is an unfair commercial practice for the trader, in relation to provision of the same or substantially the same service, to charge consumers who are renewing their subscription a higher fee than the trader charges consumers who are new subscribers.

“Subscriber” is defined as meaning a consumer who receives a service from a trader pursuant to an agreement where –

  • the consumer is liable to pay a recurring fee, and
  • the contract with the trader under which the service is supplied may be successively renewed or rolled over,

whether the fee is calculated by reference solely to a period of time or by reference to the amount of service received during that period, or by a combination of both.

Section 2 deals with consumer complaints. The section amends the Consumer Protection Act 2007 by inserting a new Part 4B, headed “Complaints Handling”.

In section 66C of the new Part 4B, “complaint” is defined as meaning any expression of a consumer’s dissatisfaction and his or her expectation of a response or resolution, and as including any request by a consumer for information or assistance, that is made to a trader arising from difficulties experienced in relation to a service provided by the trader to the consumer.

By section 66D, the Competition and Consumer Protection Commission (the Commission) may prepare and publish guidelines for traders to which this Part will apply concerning the establishment, form and operation of a scheme for handling subscriber complaints in relation to the trader’s service or the supply of the trader’s service. Traders must comply with these guidelines and, in accordance with the guidelines, must provide information to consumers in relation to the trader’s scheme and how it may be availed of, including details of how to contact the trader and specifying commitments in relation to the trader’s response to contacts initiated by post, telephone and electronic communications.

In preparing the guidelines, the Commission is to have due regard to any existing complaints handling scheme established by a trader pursuant to another enactment or pursuant to a licence issued under another enactment, and the role of any other public body in supervising such an existing scheme or in investigating or determining complaints under the existing scheme.

Before preparing and publishing guidelines, the Commission may prepare draft guidelines and may consult with any other person as it considers appropriate.

Guidelines may specify different requirements for different schemes by reference to the class of trader concerned, by reference to the commercial sector, the turnover of traders, the number of subscribers to the service or such other matters as the Commission considers appropriate.

Under section 66E, the guidelines may –

  • require traders to attempt to resolve consumer complaints and, as appropriate, to provide consumers with a satisfactory explanation, an apology or some other form of redress,
  • require procedures under a scheme to comprise specified steps, and require one or more of the steps to be taken or completed within specified periods,
  • require traders to notify consumers of the timescales for each step, and of the trader’s commitments and standards in relation to response times,
  • require traders to include a procedure for escalating complaints to a more senior specified person where a consumer is dissatisfied having completed the first step in the complaints process,
  • require traders to provide consumers with details of how the Commission can assist in resolving complaints which the trader has not resolved to the consumer’s satisfaction and how the Commission can be contacted, and
  • prescribe such other requirements as the Commission considers necessary or expedient for the purpose of enabling complaints to be dealt with or resolved.

Section 66F deals with remedies and penalties. The section provides that a trader who contravenes section 66D (1) (b) (ii) is guilty of an offence. (This is the provision requiring information to consumers in relation to the trader’s scheme and how it may be availed of, including details of how to contact the trader and specifying commitments in relation to the trader’s response to contacts initiated by post, telephone and electronic communications.)

Further, for the purposes of Part 5 of the Consumer Protection Act 2007, both such a contravention and a persistent failure by a trader who establishes a scheme to comply with the provisions of that scheme will be classed as a “prohibited act or practice”. This enables all the remedies currently available under Part 5 to be applied to this new Part 4B.

Section 3 deals in standard form with the short title and collective citation and construction of the Bill when passed and provides that it comes into operation six months after its passing.

Ged Nash

Aodhán Ó Ríordáin

Duncan Smith

December, 2020

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