Learner drivers to get refunds from AA and BSM after drip-pricing

More than 80,000 learner drivers are in line for refunds after two AA-funded schools were fined £4.2million over drip-pricing. 

The AA and BSM driving schools were found to have engaged in the illegal practice after failing to include a £3 booking fee in upfront prices. 

Drip-pricing is a deceptive marketing tactic used by companies advertising low, initial prices before revealing mandatory fees later in the purchasing process. 

The schools have been ordered to pay back approximately £760,000 to customers by The Competition and Markets Authority (CMA), with each individual set to receive about £9.

It means the amount the companies will have to fork out over their drip-pricing strategy will total nearly £5million.  

The AA Driving School or BSM Driving School will write to customers stating that the money will be automatically refunded onto the card they used to pay for their lessons. If that is not possible, they will be sent a cheque.

The CMA said the AA admitted to breaking the law and reached an agreement with the watchdog to settle the case.  

The fine is the first financial penalty the CMA has imposed for breach of consumer law since it was handed new enforcement powers.  

CMA chief executive Sarah Cardell said: ‘If a fee is mandatory, the law is clear: it must be included in the price from the very start – not added at checkout – so consumers always know what they need to pay.

‘At a time when people are watching every pound, dripped fees can tip the balance. And when it comes to something as important – and costly – as learning to drive, people deserve clarity.

‘With our new powers, it will never pay to break the law or treat consumers unfairly. Where the rules are ignored, we’ll step in to put things right.’

A spokesperson for AA driving schools said: ‘Although the £3 booking fee was made clear to customers prior to their purchase, we acknowledge it should have also been displayed at the start of the online booking journey.

‘Having listened to the regulator, we made immediate changes to our website to make the £3 booking fee more prominent.

‘We are now refunding all relevant customers. Whilst we are disappointed with the outcome of the investigation, we have fully co-operated with the CMA throughout and would emphasise that protecting consumer rights has been central to our business for more than 120 years.’

Affected customers do not need to take any action, the CMA said.

In 2023, the Department for Business and Trade found nearly half of online businesses used dripped fees, with consumers spending up to £3.5 billion per year as a result.

Under its new consumer protection powers, which came into play last year, the CMA can enforce consumer law directly against businesses without going to court. 

If it decides the companies have infringed the law, the CMA can order businesses to pay compensation to affected customers as well as fining companies up to 10 per cent of global turnover. 

Since April the CMA has reviewed more than 400 businesses to assess whether companies are following the rules about clearly showing prices without hidden fees. 

Of the new powers, Ms Cardell said in November: ‘At a time when household budgets are under constant pressure and we’re all hunting for the best deal possible, it’s crucial that people are able to shop online with confidence, knowing that the price they see is the price they’ll pay, and any sales are genuine.

‘Whether you’re spending your hard-earned cash on concert tickets or driving lessons, joining a gym or buying furniture and appliances for your home, you deserve a fair deal.

‘It’s our job to protect consumers from misleading prices and illegal pressure selling and today marks an important milestone as we take action across the economy to make sure businesses do the right thing by their customers. 

‘Since the launch of the new regime, we’ve been working hard to help businesses understand the law. But alongside supporting businesses to comply, we’ve always been clear that we will take swift action where we suspect potentially serious breaches of the law.

‘This is just the start of our work. Any businesses who break consumer law should be in no doubt we will stamp out illegal conduct and protect the interests of consumers and fair-dealing businesses.’