The business secretary has revealed that household energy suppliers are facing a crackdown on direct debit payment demands as customers grapple with record bills for gas and electricity.
Kwasi Kwarteng said on Twitter that “some” companies had been increasing direct debit payments “beyond what is required” and regulator Ofgem had launched a compliance review.
The issue came to a head in March, ahead of the near-£700 hike in the price cap, when the consumer campaigner Martin Lewis told MPs that some companies had doubled direct debits in some cases in a bid to improve their cash flow.
The founder of moneysavingexpert.com described the move as a breach of the rules and claimed it was happening across the board.
The price cap, which shielded households from the worst of unprecedented hikes in wholesale gas costs last year, was blamed for the failure of dozens of energy suppliers as they could not pass on the steep rises in costs they were being forced to swallow.
Ofgem had signalled last month that it was preparing a series of compliance reviews.
Chief executive Jonathan Brearley said then: “Concerns have been raised that some suppliers 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.
“We have also seen troubling stories about the way some vulnerable customers are being treated when they fall into difficulties.
“When households are facing massive increases in their energy bills, it is particularly important that suppliers are held to account and bad practices are addressed quickly.”
The vast majority of UK energy customers pay by direct debit but the level demanded by a supplier has been a bone of contention for years rather than months, with consumer groups often accusing firms of hoarding their customers’ cash through credit balances.
However, companies also claim to be victims too.
A recent report by uSwitch found that the amount of money owed to energy suppliers had doubled in a year to £1bn – with a quarter of households now in energy debt.
Evidence to MPs by energy company bosses last month highlighted increased concerns about customers’ ability to pay – with the energy price cap tipped to rise by a further £500 in October.
ScottishPower chief executive Keith Anderson called for the cap system to be scrapped in favour of a social tariff that would see the better off pay more.
He also suggested that, in the interim, a deficit fund should be established to allow people deemed struggling to be given 10 years to pay off £1,000 on their bills.