Customers of collapsed suppliers face ‘aggressive’ debt collection

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Customers of the 28 energy suppliers who have folded over the past year are facing “aggressive” debt collection tactics and struggling to access refunds, warns Citizens Advice.

The consumer champion is calling for an urgent overhaul of insolvency rules and the supplier of last resort (SoLR) process to manage energy company exits. Under current rules, administrators handling these insolvencies are not bound by the same Ofgem regulations that energy suppliers follow when it comes to chargebacks and debt collection.

Energy suppliers must consider customers’ ability to pay when pursuing debts and cannot bill them for energy used more than 12 months previously. These rules do not apply to trustees who buy these debts, meaning “consumers risk having their rights taken away exactly when they need them most,” Citizens Advice said.

The charity also warned of this “protection gap” following energy company exits in 2019. With the failure of dozens of suppliers affecting more than four million homes last year, the problem s is aggravated.

Some customers say they have been contacted by debt collectors and asked to produce large sums in the short term. Others have seen the repayment plans agreed with their now-collapsed supplier shredded.

Former customers of downed energy suppliers are also struggling to get their credit balances reimbursed. Although the SoLR process guarantees domestic customer credit balances, with the cost of refunds being spread across all invoices, in practice customers can wait months for the money to be returned to them or credited to their accounts with their new suppliers.

To reduce the wait, Ofgem is currently consulting on rules that would limit the amount of customer money energy suppliers can hold and require them to close these credit balances in a separate account.

Customers are also seeing incorrect invoices from administrators and struggling to get them changed, Citizens Advice said.

“We have found that too often people are pushed from one pillar to another when their supplier fails, adding to their stress and worry at an already difficult time,” said the association’s chief executive. , Lady Clare Moriarty.

Citizens Advice said “these difficult experiences could have been avoided with market reforms and strong enforcement”. It calls for “an overhaul” of the rules for suppliers and administrators of bankrupt energy companies “before winter puts more pressure on suppliers and customers”. Ofgem must repair ‘broken consumer confidence’.

The charity also notes that the consequences of toppling energy companies are not only felt by their customers, but also impact everyone’s energy bills. He estimates the cost of these supplier failures at £4.6bn, including debts that suppliers have left their customers in the form of credit balances and green energy schemes; costs incurred by energy providers who absorbed abandoned accounts, including purchasing more energy in the short term and when wholesale prices hit record highs; and the cost to the taxpayer of the quasi-nationalization of Bulb. These costs added around £164 to each household’s energy bills, estimates Citizens Advice.

In response to the report, Ofgem chief executive Jonathan Brearley said: “Market conditions are truly ‘once in a generation’ and I am absolutely clear with suppliers that now, more than ever, we need to ensure that customers are supported throughout the course of this year.

“We are already taking robust enforcement action against businesses that are failing their customers through a series of rigorous market compliance reviews looking at issues ranging from direct debits to customer service and bringing in new protections, shifting the sector towards a more resilient position financially and with adjustment and good management. »

Sources: Citizen advice: “Back from the edge of the abyss? How consumers are still reeling from the collapse of the energy market »

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