17th February 2015
Consumers lose £1 from every £10.60 of their monthly income due to faulty goods, bad business practice and poor service, research by Citizens Advice has revealed.
The Consumer Challenges 2015 report, released today, examines consumers’ experience of markets now that the country is out of recession.
People who sought help from the national consumer line, run by Citizens Advice and Citizens Advice Scotland, face being out of pocket by hundreds of pounds when firms provide faulty products or fail to uphold agreements.
Analysis of people who got help from the charity and went onto solve their problem reveals the average financial loss faced is £250 – equivalent to 9% of the average monthly income.
For the poorest fifth of the population the average consumer loss is equivalent to 19% of their monthly income.
One in four people seeking help from Citizens Advice face losses of £600 or more.
During the downturn costs for telecoms have remained stable suggesting the market is working well for consumers, but costs are often incurred if people try to cancel agreements due to bad service.
One person sought help from Citizens Advice after they waited two months for a new broadband service to be installed. After a number of cancelled installations by the company the customer decided to cancel the contract but was told he’d have to pay a £120 exit fee.
The study points out that it is not just money that is wasted when things go wrong. Consumers collectively spent 184,000 hours – equivalent of 21 years – on the phone receiving advice on their consumer problems.
Gillian Guy, chief executive of Citizens Advice, said: “Bad business practices cost people time and money. Lower prices will help ease some of the pressure on people’s finances but it does not mean that consumers are getting good service or aren’t losing money in other ways.
“Some firms are using hidden terms and unfair cancellation processes to extort money from their customers. Tough times can be a fertile breeding ground for these kinds of bad practices. As a recovery takes hold, particularly with public spending so tight, industry, government and regulators need to help households by fixing failures in consumer markets.”
The report also reveals shifts in the nature of problems related to consumer debt. Since 2012/13 a growing proportion of people have been coming to Citizens Advice seeking help with rent, council tax, water and fuel debts. Yet during the same period the proportion of debt issues around credit cards, mortgages and unsecured personal loans has declined.
Council tax debt is now the most common debt problem reported to Citizens Advice overtaking credit cards:
The charity expects to help with 191,400 of council tax debt issues in 2014/15 – a 20 per cent increase on 2013/14.
The increasing demand on housing and rise in rents means help with rental debts could reach 122,800 by the end of March 2015, 5% up on the previous financial year.
Debt problems with credit cards are expected to fall by 12 per cent to 155,700 in 2014/15.
Data from Citizens Advice and Citizens Advice Scotland reveals:
Citizens Advice helps with 1.4 million problems related to consumer goods, services and credit each year.
3,000 calls a day are made to the Citizens Advice consumer service.
Despite telecoms prices going down, it is now the fourth biggest issue the charity handles – overtaking furniture.
Top five consumer problems (not including credit) reported to Citizens Advice are second hand cars, home improvements, energy, telecoms and furniture.