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Energy companies under scrutiny for Direct Debit hikes

On 3 May the Business Secretary, Kwasi Kwarteng announced that Ofgem will undertake a series of “market compliance reviews”. These are to include a “stricter supervision of how direct debits are handled” by suppliers. The Government announced that some energy suppliers were hiking the prices of Direct Debits by more than is necessary. In some cases customers are seeing double or even triple their previous monthly payments.

Ofgem has given energy companies three weeks to explain what they have been/are doing or face punishment. In the first instance Ofgem prefers to work with companies to bring a resolution to issues. However, it does have the power to fine companies, according to Ofgem’s Compliance and Enforcement website page.

Kwarteng has said “The regulator will not hesitate to swiftly enforce compliance, including issuing substantial fines.” It would be good to see these companies fined and the money put back into the pockets of consumers!

radiator

Ofgem chief speaks out

The energy price cap rose by 54% – or on average £700 – to £1,971 a year. They are expected to rise again in October.

Just two weeks after this rise, Ofgem’s chief executive, Jonathan Brearley, said the regulator was seeing “troubling signs” that some companies were allowing customer service levels to deteriorate, and that concerns were raised by consumers and consumer organisations that some energy companies “may have been increasing direct debit payments by more than is necessary, or directing customers to tariffs that may not be in their best interest”.

It would appear that energy companies are profiteering. Brearley has said that some suppliers have been using the extra money “to prop up their finances, enabling them to follow more risky business models”. He also said that “Customer credit balances should only be used to reconcile bills, not as a source of risk-free capital.”

Citizens Advice calls for action

Citizens Advice star rating research released on the 8 April 2022  showed that “energy suppliers’ customer service is the worst it’s been on average since 2017. It comes a week on from the rise in the energy price cap “. The research showed that time waiting on the phone and for responses to emails are on the increase.

If a consumer is struggling to pay their energy bills, suppliers are responsible for providing support, such as affordable payment plans. But Citizens Advice is concerned that “many could be missing out on help they’re entitled to because they’re unable to easily contact their supplier.”

The charity calls on Ofgem to “… introduce a ‘consumer duty’ to ensure suppliers provide a service specifically designed to meet the needs of all customers.” and adds that “A similar approach is being adopted by the Financial Conduct Authority to upgrade consumer protection. It should make companies directly responsible for the outcomes their customers experience. This includes making it easy to contact companies and get support when needed.”

The shocking customer service currently being provided adds to people’s worries about bills and demonstrates that energy companies are cutting corners and not investing in supporting consumers through this difficult time.

Check your  energy bills

It’s easy to check your bills. Look at your previous bills and estimate how much you would expect to pay with the 54% rise. If you think the new Direct Debit amount is excessive then write to your energy company and complain. Ask it to lower the Direct Debit amount to a figure that you provide and include your own calculation. Then keep an eye on your consumption, taking a reading each month, so you don’t get any nasty surprises further down the line.

To calculate your bill: Take the price of electricity or gas per unit (KW/h) divided by 100 and multiply that by the consumption of the energy used. Add the cost of the standing charge, as the number of days multiplied by the daily charge, then add the VAT, which for energy is currently 5%.

So for example:

1) Pence per KW/h/100 x consumption 18.5/100) x 315.5 + £58.37
2) Days x daily standing charge 63 x 0.223 + £14.05
3) Sub total = £72.42
4) VAT @ 5% + £  3.62
5) Grand Total = £76.04

 

If you have a day and night rate, also perform the same check for the night rate.

If you have both electricity and gas then repeat the check for your gas bill too.

Check the reading

If your supplier has used estimated readings for a long time, it could be that your bill is significantly wrong. Take accurate readings and submit them to your supplier.

Don’t pay the estimated bill. Instead, send correct readings to your supplier who will provide an accurate bill. It could work in your favour, as you may have paid too much and be in credit. But do remember it could also go the other way!

Check the Direct Debit

Your Direct Debit amount should be the same each month/quarter and your supplier must inform you if it will change. If it doesn’t inform you, you can complain to your bank under the Direct Debit guarantee. The bank should then put you back into the position you were before the increase.

 

With these simple checks you can ensure that you stay in control of your energy bills.

 

Further help with energy costs and issues

Electricity pylon Everything you need to know to complain about energy problems

 

More on energy All you need to know to make a complaint about energy

 

 

 

 

How to sort out gas and electricity problems without draining your energy: 20 tips from our Consumer Fightback column – lots of information in my This Is Money column

Help with your complaints

book Logo cartoon cow at a laptop of book cover. How to Complain: The Essential Consumer Guide to Getting Refunds, Redress and Results!

 

If you need help with complaining effectively and making sure you are never fobbed off. GET THE BOOK! How To Complain: The ESSENTIAL Consumer Guide to Getting REFUNDS, Redress and RESULTS!

 

 

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101 Habits of an Effective Complainer to help you become more skilled and assertive when making complaints

 

 

 

 

 

 

Purchase downloadable templates to gain redress

 

 

 

 

 

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Latest News Laws ways to save money

Think before you sign – top 10 tips to save on subscriptions

How to save money  on subscriptions

Don’t fritter away your hard-earned money on unwanted subscriptions

top 10 tips for savings on subscriptions with picture of contract

In November 2017, Citizens Advice research revealed that in just three months consumers spent an average of £160 on unwanted subscriptions, including gym memberships, television and online streaming services. The consumer organisation also found that between June and August 2017, 9 out of 10 people were initially refused by companies when cancellation of an unwanted subscription was requested.

 

So what are your rights and the best ways to deal with these subscriptions? Here are my top 10 tips.

10 top tips to not pay for subscriptions

Look out for the subscription traps

1) Be aware of the “free” and very cheap trials of subscriptions. Most, if not all, will ask for payment information when you sign up. Set yourself a reminder to cancel a day before the first payment is due.

2) Check the cancellation rights before signing up to anything but be aware that you may still be able to challenge these in certain circumstances.

3) Check that the site is genuine. The website address should begin with “https”, have a padlock symbol, a full correspondence address (not a PO box number) and any trade logos should be genuine. Also, search the Internet for reviews and check for warning signs like lots of grammatical errors or a domain name that uses a well-known brand/product but isn’t the official website or ends in .net or .org as these are rarely used for online shopping sites. You can also check who registered the domain via the com website.

Consumer laws and regulations covering subscription terms and conditions

4) Under the Consumer Contracts Regulations 2013, you are entitled to a 14 day “cooling off” period, so if you have signed up to something off premises (e.g. online) you can cancel with no penalty.

5) Under the Consumer Rights Act 2015, consumers are protected from unfair contracts. So, for example, if a company says that you must give 6 months’ notice to cancel a subscription, that would be unfair.

6) The Consumer Protection from Unfair Trading Regulations 2008 state that companies must provide accurate and sufficient information for consumers to make a purchasing decision. For a practice to be unfair under these rules, they must harm, or be likely to harm, the economic interests of the average consumer. For example, when a shopper makes a purchasing decision he or she would not have made had he or she been given accurate information.

Use direct debit for subscriptions

7) If you are going to sign up to a subscription, try and use Direct Debit where possible. With Direct Debit, a company cannot change the regular payment amount unless it give you notice of how and when it will take it. This notice is usually 10 working days. Using a debit card or credit card is known as a Continuous Payment Authority which can be of varying amounts which can be changed without your consent.

8) When you cancel with the company, also inform your bank to ensure that the subscription payment is cancelled. You will then also be covered by the Direct Debit Guarantee, which ensures a full and immediate refund of the amount paid from your bank or building society if a mistake is made.

Cancel subscriptions

9) If you want to cancel, do so quickly and in writing so you have evidence. If you are prepared to discuss the matter because you want to haggle for example, telephone helpline numbers cannot cost the consumer more than the basic rate, so no 084 and 087 numbers. If companies do use these then they are in breach of the The Consumer Contract (Information, Cancellation and Additional Charges) Regulations 2013 and Ofcom regulations.

10) When writing to cancel, provide all details of the policy/memberships etc., dates of subscriptions and request that the cancellation is made with immediate effect. Name the laws above and describe how the company is in breach, if relevant.

Government plans to make changes around subscription laws

On 20 June 2021 the Government finally published its consumer paper for consultation. It is titled Reforming Competition and Consumer Policy. The closing date for responses is 11.45am on 1 October 2021.

My response can be found here.

Further help complaining about subscriptions and terms and conditions

More at How to challenge terms & conditions (even those you’ve agreed)

Discussing terms and conditions your rights on The One Show

 

Cover of How to Complain updated 2019 large cow logo

 

If you need help with complaining effectively and making sure you are never fobbed off. GET THE BOOK! How To Complain: The ESSENTIAL Consumer Guide to Getting REFUNDS, Redress and RESULTS!

 

 

101 Habits of an Effective complainer book cover with logo

 

 

101 Habits of an Effective Complainer to help you become more skilled and assertive when making complaints

 

 

The Complaining Cow logo download templates

 

Purchase downloadable templates to gain redress