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Warning over aggressive debt collections after energy firm failures

Tens of thousands of energy customers lost vital protection from aggressive debt collection following the collapse of 11 firms, which also left a potential bill of £172 million across the industry, according to Citizens Advice.

Eleven energy suppliers have failed since January 2018, and as administrators don't have to follow the same rules as energy suppliers when dealing with customers in debt, they can aggressively pursue debts and demand customers pay large sums at short notice. Citizens Advice says it's seen lots of examples of people who've been affected by this.

The charity says it's helped over 1,000 people with debt issues related to failed suppliers since January 2018, and says at least 32,000 customers in debt have been left vulnerable to potentially aggressive debt collection from administrators.

It also estimates the collapses have left behind £172 million in unpaid industry bills, which is likely to be paid by consumers through their energy bills.

What happens to customers in debt to failed suppliers?

When energy suppliers go into administration, energy regulator Ofgem appoints a new supplier for customers to ensure a continued energy supply, while the old supplier is taken over by administrators.

Energy suppliers licensed by Ofgem have to follow certain rules when it comes to dealing with customers who are in debt – but administrators aren't covered by the same guidelines.

Rules that are different for administrators include:

  • How long customers can be back-billed for. Under Ofgem rules, an energy supplier can't chase debts which are more than a year old if it was at fault.

    However administrators can chase debts which are up to six years old, meaning consumers could suddenly be stung with bills dating from several years before.

  • Rules around customers' ability to pay. Ofgem requires suppliers to consider people's ability to pay when collecting debts.

    But if a customer has previously made an agreement with their supplier to pay a debt at an affordable rate, this will become void when an administrator takes over.

    So a customer who was on a plan to repay their debt gradually could be asked to repay the entire sum at once with little notice.

What changes is Citizens Advice calling for?

Citizens Advice wants the Government to take action to make sure administrators follow the same rules as suppliers, and have to consider the interests of consumers.

It's calling for the Government to use an upcoming Energy White Paper to fix what it sees as the protection gap for customers who are in debt when their energy suppliers collapse.

It also wants there to be more regulation of how industry costs are paid, so that consumers don't end up paying big debts from suppliers.

What does Citizens Advice say?

Citizens Advice chief executive Gillian Guy said: "Consumers shouldn't have to foot the multi-million pound bill left behind when companies collapse – and they certainly shouldn't lose their usual protections in the process.

"The Energy White Paper is the perfect opportunity for the Government to close the gap in protections and limit the cost to consumers of any future supplier failures. It must act now."

What does Ofgem say?

Philippa Pickford, Ofgem's director for future retail markets, said: "Competition in the energy market has helped to drive down prices for consumers.

"Ofgem introduced new tests this summer for companies applying for a licence to supply energy, to help drive up standards, ensure they meet their industry obligations and reduce the risk – and cost – of supplier failure. Ofgem will also consult in the autumn on tougher rules for existing suppliers.

"Under Ofgem's safety net if a supplier fails, the energy supply and credit balances of its customers are protected. We agree with Citizens Advice that this process has generally worked well and we are looking at ways of improving the experience of these customers when they are transferred to new suppliers and to reduce costs associated with supplier failure."

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