FS19/04: Fair Pricing in Financial Services: summary of responses and next steps

Show FS19/4 (PDF)[1]

Infographic: 6 evidential questions to help assess concerns about fairness in price discrimination (PDF)[2]

In October 2018, we published a Discussion Paper[3] (DP18/9) launching a debate on the fairness of certain pricing practices in financial services. We focused the debate on the following pricing practices:

• firms charging different prices to different consumers based solely on differences in consumers’ price sensitivity (also known as ‘price discrimination’)
• firms charging existing customers higher prices than new customers (sometimes referred to as ‘loyalty pricing’ or ‘inertia pricing’)

These practices are not always unfair, but we have concerns that in some forms they can potentially disadvantage some consumers significantly, in particular the most vulnerable and least resilient consumers.

The judgement of when pricing practices are unfair is not always straightforward so, in line with our Mission, we developed a 6 question framework (the Framework) to be transparent about how we think about the issue of fair pricing in retail markets. In the DP, we asked stakeholders for their views on our Framework, invited comments on its application to the specific case of inertia pricing, and their views on the remedies we might draw on if we conclude that a given pricing practice is unfair.

In the FS we:

• summarise the main themes from the 51 formal submissions we received on DP18/9 and, where appropriate, provide our responses
• provide further clarification on how we will apply our framework in practice
• outline how we will approach the next stage of work, which will focus on operationalising our approach to fair pricing in retail markets

The fair treatment of existing customers is an ongoing priority for the FCA – as part of this work, we’re focusing on the fairness of pricing and tackling the potential harm caused by certain pricing practices.

Next steps

Our work on fair pricing will continue after this FS. We will apply our thinking to issues that we identify in our market specific work. The first application of the framework will be in the General Insurance Pricing Practices Market Study[4] and we will be publishing the findings from that later in 2019. We will also begin the work required to formally embed our thinking into our regulatory approach.  As part of this work we will be contributing to the review of our principles, which will be the first strand of our Handbook Review. As set out in our Business Plan, we intend to publish a Discussion Paper on the review of our principles in Q4 2019/20. We will report on the next phase of our fair pricing work at that time.