Being a consumer is far too hard.
But it’s good that the government is looking at ways to make it easier.
Over the weekend, the government announced two measures to be introduced in the budget tomorrow to help struggling consumers. The first is to protect people from falling into ‘subscription traps’. Many will be familiar with these situations: you sign up for a product or service after seeing an advert for a ‘free trial’ or reduced price offer, only to be stung by unexpected payments taken automatically from your account at a later date.
The government is also considering forcing firms to make their terms and conditions (T&Cs) shorter and clearer so their customers better understand the decisions they are taking.
Citizens Advice called for action on subscription traps and T&Cs last year
The government’s interest in this area is welcome. The announcement follows two pieces of research Citizens Advice published last year. In one, we found that over 2 million consumers each year have problems cancelling subscriptions, and more than 8 in 10 did not realise they had even agreed to a subscription in the first place.
In another, we found that the majority of people don’t read terms and conditions thoroughly, even when they are prompted to do so. And, in regulated essential service markets, those who do read T&Cs are less likely to be ‘very satisfied’ with their decision than those who don’t. Both reports recommended making T&Cs easier to understand.
This is part of a much bigger issue: being a consumer is too hard
The use of subscription traps and unhelpful T&Cs are part of much bigger issue: being a consumer is just far too hard. We know that UK consumers face considerable problems, causing detriment amounting to at least £23 billion in 2015. This works out at £446 per person a year — close to a week’s wage for the average person.
It is inevitable that people will sometimes encounter problems when purchasing goods or services. But it is essential that two things can happen when they do: consumers are able to shop around in order to find an alternative to the company to do business with, or to lodge a complaint with their current provider in the hope redress or resolution. Both of these actions pose challenges. For example, we know that complaints processes are often too complicated and time-consuming, producing results that leave many dissatisfied.
Consumers are penalised for their loyalty in essential service markets
Even worse, there is evidence emerging that consumers who don’t switch or shop around in markets for essential service pay a penalty for their loyalty to their current provider. In energy, for example, customers can face a loyalty penalty of almost £300 a year. And customers who have stayed with the same provider for over 15 years face a penalty of over £3,000. This is why Citizens Advice is conducting research to explore the true cost of loyalty across essential service markets.
Findings so far suggest that vulnerable consumers may be disproportionately affected: our recent analysis shows that some of the poorest pensioners and families in Britain are paying an extra £250 million each year for being a loyal energy customer. We are recommending that the government extend the prepayment meter cap to all those eligible for the Warm Home Discount to help those worst affected by energy bills.
There is much more to do
These issues — the challenge of shopping around in markets for essential services, poor complaints processes, and the penalty incurred by vulnerable customers who are less able to switch or shop around — are three major reasons why being a consumer is far, far too hard at the moment. At Citizens Advice will continue to investigate the challenges that consumers face and make suggestions to make their lives easier.
The government’s plan to tackle the subscription trap and improve T&Cs is a welcome sign of intent, but is only the start of the improvements that need to be made for consumers. The Green Paper on consumer policy, announced in the Autumn Statement last November and due to be published in spring, provides a perfect opportunity to do more.
