Research and analysis

Vulnerable consumers: challenges and solutions (Belfast)

Updated 13 November 2018

On 15 October 2018, the Competition and Markets Authority (CMA) jointly hosted roundtable discussions in Belfast on vulnerable consumers with the Consumer Council for Northern Ireland (CCNI) and the Utility Regulator.

These roundtables focused on the challenges experienced by vulnerable consumers in Northern Ireland and the potential solutions to these challenges.

Representatives from a range of regulators, charity and consumer bodies, and business attended the roundtable.

A list of attendees is provided at the end of this summary. The discussion was held under Chatham House rules.

The remainder of this summary covers the main points raised during the roundtable.

Understanding the challenges

The CMA provided an overview of its programme of work on vulnerable consumers, as a priority area of focus in its 2018/19 Annual Plan. It explained its understanding of vulnerability as both situational - anyone can be considered vulnerable in certain contexts - and as reflecting particular characteristics that can be associated with vulnerability, such as being on a low income, having a mental health condition, or a physical disability. The CMA explained the different elements of its programme of work, comprising roundtable discussions, commissioned research, literature review and stakeholder engagement. The CMA set out the potential implications for the programme of work in terms of its approach to:

• case selection and prioritisation;
• gathering evidence and analysis;
• remedies development;
• opportunities for cross-cutting work with regulators.

The CMA also set out some of the key themes coming out of its programme of work and the roundtable discussions to date, covering the challenges that vulnerable consumers can face when engaging with markets, and potential solutions to address these. The CMA also talked about a particular area of challenge, namely a form of price discrimination where long-standing customers, often on roll-over contracts or default tariffs, end up paying more for new customers, sometimes termed ‘the loyalty penalty’. This was in the context of the super-complaint which the CMA is currently investigating.^{[footnote 1]}

At the first roundtable, CCNI delivered a presentation to provide context on consumers and their engagement with markets in Northern Ireland. CCNI identified a number of areas where consumers in Northern Ireland could be considered more vulnerable compared with consumers in Great Britain. This included having lower average incomes and lower levels of saving; and different spending patterns - consumers in Northern Ireland spend nearly double the amount on clothing and footwear on a weekly basis, to their British counterparts. They also spend a higher proportion of income on eating out. Other areas of difference included the nature of markets, such as in energy where 68% of consumers in Northern Ireland use home heating oil, and challenges with market access, such as in the case of parcel deliveries due to high surcharges (average of £11 per parcel). CCNI also highlighted that there are lower levels of competition in some markets compared with Great Britain, due to companies - such as in car insurance or price comparison websites - not operating in Northern Ireland.

The plenary discussion identified a number of areas of challenge for vulnerable consumers in Northern Ireland.

These included:

• In the energy market, the high price of home heating oil was highlighted as a key issue for vulnerable consumers. This is further exacerbated by the fact that, unlike with other types of energy, consumers are required to purchase a large volume of oil upfront. Oil is becoming increasingly unaffordable, and as a result, some consumers are going without by self-disconnecting their energy services. Some, particularly elderly, consumers are paying in more affordable instalments via a prepayment meter for electric heating, but this means that overall they are spending more, because they can’t afford the upfront payment for oil. Others are using fuel stations to ‘top up’ their oil in smaller amounts because the upfront payment is more affordable, but are paying a premium of up to 40% as a result. Participants also identified the lack of regulation and oversight of this sector as a key challenge.

• Digital access and inclusion, particularly in rural areas where consumers have limited broadband signal, and/or a limited number of broadband options that they can choose from. In some areas, there is no real choice between suppliers for telecoms services. Though, it was also suggested that the data indicates that telecoms coverage was better than many consumers in rural areas perceived it to be. Stakeholders also identified issues with the level of digital skills among consumers, particularly elderly consumers who may feel confident using the internet socially, but not for engaging with suppliers eg by completing online forms or navigating price comparison websites.
• Limited communication channels for engaging with suppliers. Participants highlighted that many vulnerable consumers are in need of face to face support/advice but increasingly this is only offered by suppliers over the phone, which may not be suitable for their needs. Related to this, the complexity of billing information means that consumers often require support in understanding what their bills mean, which is most effective when it is delivered face to face. Charity bodies highlighted that there has been an increase in requests for more general advice and help with day to day activities and engagement with markets from consumers using their services. This was highlighted as a particular area of challenge for consumers with mental health problems. More generally, participants also highlighted that there is no ‘one size fits all’ approach to communication and a range of options should be available so consumers can use the channel that works best for them.
• There was agreement that the ‘loyalty penalty’ is a cross-cutting issue in a range of markets, and the view that harm for consumers in Northern Ireland was greater because they tend to be more vulnerable than consumers in the UK, generally (for example having lower average incomes). Low levels of consumer engagement is a key challenge in Northern Ireland; consumers are reluctant to switch because of a lack of awareness of the potential benefits of switching, a lack of motivation to do so, and fear of being cut off from services. For example, consumers tend only to engage with retail banking services if they need to open a new bank account. Many consumers also feel comfortable with their existing supplier and therefore don’t consider that there is any ‘need’ to switch.
• There was also recognition that the ‘loyalty penalty’ is not the only, or main, area of challenge for many vulnerable consumers. Other areas include being at risk of financial harm from scams, which have increased over time, and the need for improved financial literacy and capability skills to help mitigate this.
• From a policy perspective, the lack of granular data on Northern Ireland is a key challenge for policymakers to identify where the priority areas of focus are and consider how they might best be addressed.

Addressing the challenges

The plenary discussion also considered different types of solutions that could be developed to help address the areas of challenge for vulnerable consumers in Northern Ireland. Attendees raised the following issues when discussing potential solutions:

• Developing a consistent and comparable definition of ‘vulnerability’ was considered important to inform remedies development.
• The need for a different approach, going beyond information and engagement remedies to consider how to effectively intervene in markets to change business behaviour. This could be done through the establishment of ‘minimum standards’ which companies have to meet, to ensure they’re sufficiently supporting their more vulnerable customers. Other potential options could include the development and application of codes of conduct/practice for businesses, which uphold consumer interests.
• Identifying and sharing best practice by suppliers was also considered helpful to improve standards across sectors and to help establish a benchmark of good business behaviour. Related to this, the importance of getting business input to inform remedies design and implement, was also highlighted.
• The potential benefits of increased data-sharing and use of technological to identify and support vulnerable consumers was also considered. However, participants were also very mindful of the risks from this, relating to data protection concerns and the potential for misuse of consumer data and the potential for certain groups who are already vulnerable, to be increasingly excluded from solutions if they are heavily reliant on technology or internet access. In addition, there are specific challenges for Northern Ireland in implementing this type of remedy because of differences between its legislative framework and the rest of the UK in relation to data-sharing.
• The importance and benefits of trialling and testing remedies was also highlighted as a key consideration, to ensure that solutions effectively address the issues.

Organisations which attended the roundtables;

• Consumer Council for Northern Ireland
• Utility Regulator
• Advice NI
• Age NI
• Bryson Energy
• Christians Against Poverty
• Public Health Agency
• National Energy Action
• Ofcom
• Trading Standards Service
• Northern Ireland Association for the Care and Resettlement of Offenders
• Financial Inclusion Centre
• Causeway Coast and Glens
• Northern Ireland Housing Executive
• Commissioner for Older People Northern Ireland

1. On 28 September 2018 the CMA received a super-complaint from Citizens Advice, raising concerns about the ‘loyalty penalty’ issue. Citizens Advice identified 5 markets where it has found evidence of this issue: broadband, mobile, cash savings, home insurance, and mortgages. The CMA has 90 calendar days to review the concerns raised and what action to take and will publish its response by 27 December 2018. More information can be found on the case page. ↩