Tuesday 23 September 2014

Suppliers “scare” customers into paying debts

The UK’s biggest energy suppliers have been accused of “scaring” customers into paying their debts with letters which appear to be from another company.

This practice of sending correspondence with a different company’s letterhead threatening legal action if customers don’t pay up is something regulator Ofgem has an eye on.

It has reviewed the debt collection tactic and found evidence of some “poor practice which certainly fall below the standard we would expect”.

On Monday Ofgem issued an open letter warning customers “must not be misled, pressured or scared into making payments they cannot afford”.

Over the summer, domestic energy suppliers were asked by Ofgem whether they used “alternative branding” on letters demanding money.

The six largest had all at some point used other brands, with letters appearing to be from debt collection agencies working on their behalf.

Right up until July 2014, four suppliers – British Gas, E.ON, ScottishPower and npower used the tactic to speak to customers in debt. Of these, only npower continues to use the tactic with its in-house team, Collections Direct and it said there are plans to make this distinction clearer.

EDF Energy stopped the practice in 2009, while SSE only used it during a three week trial in 2010, found Ofgem.

Of the smaller suppliers who engaged in the tactic, Utilita stopped in 2013 and Utility Warehouse continues to use Utility Debt Collectors Ltd to collect debt.

A spokesperson for Ofgem said: “We found that while this practice was once widespread, the vast majority are no longer using alternative branding, with some having changed their practice recently. We also uncovered some examples of poor practice which certainly fall below the standard we would expect.”

The watchdog plans to review domestic suppliers’ communications with indebted customers this autumn, they added, to make sure consumers “struggling to pay are made aware of repayment options available.”