Business

Ofgem to review energy firms' debt letters

Oven
Image caption Energy customers may have been confused by these letters, Ofgem says

Regulator Ofgem is launching a review of energy firms' communications with customers in debt amid concerns over potentially misleading letters.

The regulator has been studying some firms' tactics of using alternative branding on letters chasing those who fail to pay bills.

It said some of the letters, exposed in an investigation by BBC Radio 4's You and Yours, had been "unacceptable".

But it added that firms had now changed the wording on correspondence.

"We're concerned about text in the letters which tends to say things like 'your energy supplier has passed your case to us for resolution' implying that it is a different organisation and that it has reached a different stage of the process," said Philip Cullum, of Ofgem.

"We're going to be writing a letter to the companies in the next day or two setting out some of the examples of the things that we've found that we think are unacceptable".

The regulator said that customers must not be misled, pressured or scared into making payments they could not afford. It will review firms' communications with customers in debt this autumn.

It told You & Yours that it could fine companies or make them compensate customers if it decided the energy firms acted unfairly.

'Transparency'

Five of the UK's big six energy companies have sent out letters to indebted customers headed with alternative names, with the exception of SSE.

They said they were designed to encourage people to pay up or seek their help.

British Gas wrote to customers in debt using the names Debt Recovery Services and Central Recoveries but says it stopped doing so in 2012. EDF says it ceased using the name Knight Debt Recovery in 2009 to allow "complete transparency for customers".

Npower still sends final demands from Collections Direct. It says the letters are only issued after it has made four attempts to communicate with a customer itself, and the letters are clear, including branding, that Collections Direct is a trading name of Npower.

E.On has a separate company registered for the purpose: Utility Debt Services. It has also suspended use of the name whilst it conducts a review.

Scottish Power suspended the use of its alternative name Sterling Collections earlier this year. It has now decided to stop using it altogether.

Similar branding to collect unpaid debts have been used by banks and the Student Loans Company.

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